Hedge funds are alternative investments that can offer numerous benefits and advantages to investors. According to Nobel Prize winner and economist Dr. Harry Markowitz's Modern Portfolio Theory (MPT), up to 25% of assets in a traditional portfolio should be allocated to alternative investments due to diversification reasons. Because of the non-correlative nature of alternative investments to traditional stocks and bonds, hedge funds can hedge market risks during recessions due to its flexibility in investment style. This is one of the primary reasons why large institutional clients such as pension funds and endowment funds always allocate a significant amount of assets into alternative investments.

THE FACTS:

• Flexible in investment style; capable of using leverage, short selling, futures and other exotic derivatives
• Able to profit during recessions and hedge against falling markets
• Ability to deliver non-correlated returns to traditional equity and fixed income markets
• Legally structured so that investment management is given an incentive to generate positive returns in all market conditions, as opposed to being compensated by assets under management
• Offers diversification to traditional portfolios and lowers overall volatility while enhancing portfolio efficiency
• Has shown an a history of outperforming standard equity and bond indices
• Overall, many managers commit their own capital into the fund
• Provides a wide range of investment styles that are not correlated to each other