Investment Risk

Investment risk is the direct result of the investment decision making process, from overall portfolio strategy to individual security selection. Investment risks include adverse movements in equity markets, interest rates, credit spreads and foreign currencies.

Operational Risk

Operational risk by contrast, is the risk arising external to the investment decision making process. When investing in hedge funds, operational risks include:

• Weaknesses in the manager's and / or fund's business and operational infrastructure;
• Deficiencies in accounting controls and procedures;
• Errors in the NAV calculation; and
• Theft and Fraud.