Leverage, liquidity and concentration: the key aspects of hedge fund risk

Hedge fund managers may need to sail close to the wind to generate returns, adding leverage or concentration to their portfolios. A fund of fund manager needs to remains mindful of these risks, and also take liquidity into account to protect end-investors' interests, as International Asset Management's Andrew Gibson explains

One ship drives east, and another drives west

With the self-same winds that blow;

'Tis the set of sails

And not the gales

That decides the way to go.

Ella Wheeler Wilcox

Throughout the year, there are ocean races where sailors pit their skills and ships against the wind, waves and weather, as well as fellow competitors. How a skipper captains their ship, using all available resources, can make the difference between winning the race and capsizing.

By getting the right balance, a good skipper unlocks