How are hedge fund returns generated and how are they measured?

Hedge fund returns are generated through a variety of investment strategies, such as long/short equity, eventdriven, global macro, and others. The goal of these strategies is to achieve positive returns that outperform traditional investments such as stocks or bonds.

Hedge fund returns are typically measured using metrics such as absolute return, which represents the return generated by the fund over a specified period of time. Another important metric is the Sharpe ratio, which measures the riskadjusted return of the fund relative to a riskfree investment such as U.S. Treasury bills. Other metrics commonly used to evaluate hedge fund performance include the Sortino ratio, the Calmar ratio, and the information ratio.

It is important to note that hedge fund returns can be volatile and are often not directly comparable to traditional investments due to their unique strategies and risk profiles. As with any investment, investors should carefully consider the risks and potential rewards before investing in a hedge fund.