kaal:claim:2748096-023

Strategy diversification does not insulate the hedge fund industry from systemic risk: returns across different hedge fund strategies were more correlated during the financial crisis of 2007-2008 than before it, so the industry can pose systemic risk despite investing across a broad spectrum of assets and strategies.

hedge fund returns should not affect their systemic risk. However, evidence exists that the returns of different hedge fund strategies were more correlated during the financial crisis of 2007-2008 than before the crisis

Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016), Hedge Fund Returns and Investment Strategies, p. 8
https://ssrn.com/abstract=2748096 · source PDF

Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096

• periods of market stress
• evidence drawn from the 2007-2008 crisis

failuresupport: evidencedfailure: diversification breakdown under stressfamily: systemic-risk-transmissionsystemic-riskrisk-and-incentives

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