One of your advisory clients meets the financial requirements for investing in a hedge fund. Having read so much about their outstanding performance, he asks you to describe any negatives to adding one to his portfolio. You could respond:
A) Expenses tend to run very high diminishing the funds' performance.
B) the designed strategy of many hedge funds is to generate positive returns in both rising and falling markets.
C) with a large variety of available investment styles, investors have a plethora of choices to assist them in meeting their objectives.
D) as part of an asset allocation class, hedge funds may reduce overall portfolio risk and volatility and increase returns.
Answer: A) Expenses tend to run very high diminishing the funds' performance.