Chartered Portfolio Manager and Investment Management- week 3 Essay

Chartered Portfolio Manager and Investment Management- week 3 responses - Essay Example I agree that it is not suitable to add a hedge fund to such a client’s portfolio who has low capital base, risk averse nature, and willingness for long-term returns. Despite the accessibility of general public to the hedge funds as a result of their inclusion in mutual funds, they are not a viable option because of their cost and subjectivity of information. Participation in returns is not likely to increase considering the current limitations of the hedge funds. You have provided a concise definition of hedge funds. This was a particularly informative post as it introduced some new concepts such as derivatives and the investment technique of leverage. I don’t think it is suitable to add hedge funds that use leverage to a client’s portfolio given the enormity of risk of loss. I agree that institutions’ willingness for diversification drives them toward hedge funds. However, a fair understanding of risk and its comparison to the capital base is fundamental to making informed