Asset class risk is the potential for loss due to the concentration of a portfolio in a particular asset class. This risk typically arises in some hedge fund strategies such as long-term stock sales, loans, convertible bonds, merger arbitrage, active investors and traders who only invest in certain asset classes. The main components of a given security’s return, measured by its beta, are due to systemic factors affecting a particular asset class. Previous investment entities are usually overly exposed to risks affecting a particular asset class at a particular time. But with the appropriate derivatives, you can hedge your assets by hedging your market risks.
We aim to reduce exposure to asset class risks by investing in multiple strategies and imperfectly correlated products spanning multiple asset classes, including stocks, fixed income, commodities, currencies, and volatility.