CHAPTER 31Hedge Fund Universes
Hedge funds are not like traditional investments. They are investment funds or portfolios that reflect the manager’s view of how to exploit mispriced assets. Hedge funds are not an asset class like stocks or bonds—they are investment vehicles. Investors provide money to the hedge fund manager, and the manager in turn invests the money in anything, but usually in publicly traded securities like stocks, bonds, and derivatives. However, hedge fund managers have the freedom to invest any way consistent with their mandates. There is a wide variety of hedge fund types. They are distinguished by the strategies they pursue. The construction of benchmarks must therefore take a different approach.