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The Case for Hedge Funds. Now More Than Ever.

With the S & P 500 down more than 20% from its highs and the TSX down 10% in one month, many investors are wondering how to protect themselves from market declines. Aside from pulling money out of the market entirely, the ability to short stocks and use a multiple of strategies to reduce risk can provide positive returns in an otherwise down market.

Hedge Funds can provide this protection. There has been alot of negative press about Hegde Funds as some portfolio managers took excessive bets or leveraged their positions and blew up their funds in the process when they took the wrong side on a position.

Looking at multiple strategy funds is one way to diversify away some of the risk of downward markets as well as the risk of one manager taking an excessive position.  For example, one could look at Man Group which is that largest Hedge Fund manager in the world managing approximately $75 billion in hedge product. There first offering in Canada returned 25.9% over the 12 month period ending May 31, 2008 and has averaged 11.1% since inception.

It is prudent to look for strategies other than long only stock selection to provide returns and hedge funds can do this regardless of the attention the media has put forward relating to some of the bad apples in the industry. Your feedback whether it be questions relating to hedge funds or your views on the matter are more than welcome.


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