Geopolitical uncertainty, market volatility and concerns around artificial intelligence market concentration are pushing institutional investors to look at hedge funds for risk mitigation.
Risk mitigation — sometimes called crisis risk offset, diversifying strategies or simply bucketed under hedge fund allocations — uses uncorrelated or diversifying approaches to protect portfolios during market downturns.
“Think about a program that is designed to defend against the risks most present in an institutional portfolio. So that could change depending on whose portfolio it is, but generally the primary risks are equities and credit to a certain extent, and really the programs are designed to defend against the periods when those things suffer,” said Zachary Driscoll, head of marketable alternatives at Meketa Investment Group.
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