Do hedge funds hedge? The experience of the Great Recession - Vanguard Research
Do hedge funds help investors avoid the worst during periods of distress in the financial markets? The recent Great Recession provides an opportunity to explore the experience of hedge fund investors during just such a time.
In this paper, Vanguard looks at funds of hedge funds, as well as at several categories of specific types of hedge funds.
It finds that hedge funds served to insulate investors to some degree from the extreme stock market crash, but that most of the hedge fund categories failed to provide significant diversification beyond that of a 60/40 portfolio of stocks and bonds.
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Individual investors have experienced painful losses in recent years. Some have left the financial markets; others are reluctant to recommit their assets.
Financial advisors — who know there is a correlation between risk and reward — want to get their clients off the sidelines, out of cash alternatives, and back on track toward achieving their financial goals.