Question

Discuss the article Do Hedge Funds Hedge in total. Use between 6 and 10 sentences. Penmanship will have a significant effect on the grade. Organization and grammar will also count. Bullet points are not acceptable. The article is Do Hedge Funds Hedge? by Clifford Asness, Robert Krail and John Liew .

Answer 1

The article “Do Hedge Funds Hedge” examines the extent to which hedge funds provide return benefits and diversification benefits. Investors should take cognizance of the fact that many hedge funds hold illiquid exchange-traded securities. They also hold difficult-to-price OTC (over the counter) securities. Both of them lead to non-synchronous price reactions. As such through them hedge funds gets a certain degree of flexibility with regards to how they mark their positions for month-end reporting. Investors should also take note that making a successful hedge fund portfolio is not always an easy proposition. Investors will do well if they carefully examine rosy claims being made by hedge funds like claims regarding high monthly returns. Investors will have to properly analyze the claims using certain statistical tools and after accounting for the fact that hedge funds price their securities at a lag.