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November 28, 2005
Be careful how you reinvest
In a recent article, Econobrowser takes look at hedge funds, and how rate of return is insufficient to understand the risk and reward involved. One interesting point that doesn't come up in the article or the comments that follow is the role of diversity. If you can rebalanced your portfolio to pursue uncorrelated several strategies, and your investment vehicles contain limited downside (because the are LLC's), and you have access to a riskless asset (like government bonds) then you can make big money even if all your risky strategies converge to zero value given enough time.
Posted by OneEyedMan at November 28, 2005 11:14 AM
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