Chapter 12. Keeping the Wheels on the Hedge-Fund ATV

Financial publications love to discuss the proliferation of hedge funds, with much ink devoted to the negatives these days. But the positive case for hedge funds is straightforward: Hedge funds have several alternative investment strategies at their disposal, such as hedging against market downturns, investing in asset classes (such as currencies or distressed securities), and utilizing return-enhancing tools (such as leverage, derivatives, and arbitrage). The hedge fund’s added flexibility as an investment vehicle is a great allure adding to their popularity, with alternative investments representing nearly $700 billion in today’s managed assets.

On the supply side, the arguments for hedge funds ...

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