How Hedge Funds Manage Risk

When it comes to risk management, there is no “one size fits all” for hedge funds. Depending on performance objectives, portfolio size, securities traded and investment strategy, different hedge funds will end up with different approaches to managing risk. That said, when considering how they want to manage risk, all funds need to consider four key tasks: defining risk; monitoring risk; controlling risk; and communicating risk. This paper describes these tasks and how hedge fund managers can use them to control risk and grow investor capital.