The term ‘hedge fund’ refers to pooled investment structures similar to that of mutual funds. However, unlike mutual funds, a hedge fund may utilize a broad array of financial instruments beyond long-only stocks and bonds. In fact, it is the use of these strategies – such as shorting a stock – that may make it possible for hedge funds to achieve returns in both rising and falling capital markets. Coupled with low correlations to many other asset classes, the inclusion of hedge funds in a traditional portfolio could help provide portfolio diversification and the ability to weather less favorable market conditions.

Historical Asset Correlations to Hedge Funds

(January 2000 – June 2017)
Correlation Chart 6.17 

All data is sourced from Pertrac, MSCI and Newedge. Hedge Funds are represented by the Edhec Risk Funds of Hedge Funds Index. Global Equities are represented by the MSCI World Index. Commodities are represented by the S&P GSCI. REITs are represented by the MSCI U.S. REIT Index. Managed Futures are represented by the Newedge CTA Index. Bonds are represented by the Barclays Capital U.S. Corporate Investment Grade Bond Index. This material is provided for informational and educational purposes and is not provided in an attempt to influence particular or pending investment decisions with any particular public jurisdiction or government entity. An investor cannot invest directly in any index and the potential for diversification does not ensure a profit or protect against loss.