Every hedge fund claims its returns are uncorrelated to the broader markets. Yet the reality is that many hedge funds earn the bulk of their returns from a combination of simple market betas.
This poses a problem for institutions that invest in hedge funds for diversification, says Sa'ad Shah, a managing director at Diversified Global Asset Management (DGAM), a fund of hedge funds manager based in Toronto, Canada.
"Hedge funds can provide a false sense of diversification because at the end of th
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