The benefits and limitations of managed accounts

academic paper

By their very nature, hedge funds allow the investor to be exposed to different risk factors such as volatility and counterparty or liquidity risk. Exposure to these risk factors is not only a source of superior risk-return trade off, but also the very essence of hedge funds' extensive diversification possibilities compared with traditional investments .

These advantages do not come without a downside. Gaining exposure to alternative risk factors usually requires trading activities that can b