The Investment Strategy Used by Hedge Funds to Reduce Risk

What lies beyond the Hollywood portrayal of hedge funds? Discover the surprising truth about these sophisticated investment strategies that have traditionally been reserved for the world's largest institutional investors.

Bob Elliott, former Bridgewater Associates executive who helped manage the world's largest foreign exchange book, pulls back the curtain on how hedge funds actually work. Rather than wild, risky bets, these strategies focus intensely on risk management and creating consistent returns through market conditions that might devastate traditional portfolios.

You'll learn why major university endowments and sovereign wealth funds allocate billions to hedge fund strategies despite seemingly modest returns. The answer lies in return consistency and diversification benefits that become apparent precisely when they're needed most - during market downturns and economic uncertainty.

We explore the concept of "edge" - the specialized knowledge or systematic approach that allows hedge funds to generate differentiated returns - and the various strategies from global macro to equity long-short that populate the alternative investment landscape. Bob explains how these approaches seek to isolate skill and minimize noise, allowing managers to focus solely on their areas of expertise.

Perhaps most exciting for everyday investors, we discuss how the traditional barriers to hedge fund strategies - high fees, tax inefficiency, and high minimums - are being dismantled through new investment vehicles like ETFs. These innovations finally make sophisticated alternative strategies accessible without the drawbacks that have historically eroded returns for investors.

Whether you're looking to understand institutional investment approaches or considering how alternatives might fit in your own portfolio, this conversation provides clarity on one of investing's most misunderstood corners. Ready to rethink what diversification really means in today's interconnected markets?

Find Du Charme Wealth Management here:
https://ducharmewealth.com

Timestamps:
[00:00:00] Intro
[00:04:01] Breaking Down the "2 and 20" Structure
[00:08:48] Who Invests in Hedge Funds and Why
[00:15:31] Misconceptions vs. Reality in Performance
[00:21:00] Understanding Different Hedge Fund Strategies
[00:30:13] Risk Management and Return Consistency
[00:37:08] Accessibility and Tax Efficiency Considerations

DISCLAIMER:
Information presented on this program is believed to be factual and up-to-date, but we do not guarantee its accuracy, and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Encompass More Asset Management LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC) and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.