A pension fund manager is planning to diversify the fund's portfolio by including hedge fund investments. The manager is, however, concerned about the potential disproportionate distribution of risk that may result from this allocation. To mitigate this risk, what measures should the pension fund manager take?

Exam-Like

Allocate the money across several different hedge fund strategies to diversify away the asymmetry in risk sharing.

13.3%

Choose a reputable hedge fund manager that manages investments for other major pension funds.

6.7%

Ensure that the hedge fund managers have a sizable amount of their own wealth invested in their fund.

66.7%

Require the hedge fund to provide a daily position report to better monitor the potential asymmetry in risk sharing.

13.3%

Financial Risk Manager Part 2