Editing Hedge fund (section)

===Risk management===
Investors in hedge funds are, in most countries, required to be qualified investors who are assumed to be aware of the [[investment risk]]s, and accept these risks because of the potential [[Rate of return|return]]s relative to those risks. Fund managers may employ extensive [[Financial risk management|risk management]] strategies in order to protect the fund and investors. According to the ''[[Financial Times]]'', "big hedge funds have some of the most sophisticated and exacting risk management practices anywhere in asset management."<ref name=Jones>{{cite news |title=Hedge funds: Stringent controls on losses and investment |first=Sam |last=Jones |url=http://www.ft.com/cms/s/0/5f253ab8-5371-11e0-86e6-00144feab49a.html#ixzz1ICqUvUmv |archive-url=https://ghostarchive.org/archive/20221210201217/https://www.ft.com/content/5f253ab8-5371-11e0-86e6-00144feab49a#ixzz1ICqUvUmv |archive-date=10 December 2022 |url-access=subscription |newspaper=Financial Times |date=21 March 2011 |access-date=30 March 2011 |url-status=live }}</ref> Hedge fund managers that hold a large number of investment positions for short periods are likely to have a particularly comprehensive risk management system in place, and it has become usual for funds to have independent risk officers who assess and manage risks but are not otherwise involved in trading.<ref name=Cassar/> A variety of different measurement techniques and models are used to estimate risk according to the fund's leverage, liquidity, and investment strategy.<ref name=Lo/><ref>Jaeger, Robert. A. (2003) Mcgraw Hill, All About Hedge Funds "A hedge fund is an actively managed investment fund"</ref> Non-normality of returns, volatility clustering and trends are not always accounted for by conventional risk measurement methodologies and so in addition to [[value at risk]] and similar measurements, funds may use integrated measures such as [[Drawdown (economics)|drawdowns]].<ref name="risk">{{Citation|title=López de Prado, M. and A. Peijan: Measuring Loss Potential of Hedge Fund Strategies| work=Journal of Alternative Investments|volume= 7|issue= 1 |pages= 7–31|year=2004|ssrn=641702| last1=Lopez De Prado| first1=Marcos| last2=Peijan| first2=Achim}}</ref>

In addition to assessing the market-related risks that may arise from an investment, investors commonly employ [[operational due diligence]] to assess the risk that error or [[fraud]] at a hedge fund might result in a loss to the investor. Considerations will include the organization and management of operations at the hedge fund manager, whether the investment strategy is likely to be sustainable, and the fund's ability to develop as a company.<ref>{{cite book |title=Hedge funds: crossing the institutional frontier |last=Jaffer |first=Sohail |year=2006 |publisher=Euromoney Books |isbn=978-1-84374-268-5 |pages=113–114}}</ref>