MAD, bad and dangerous, hedge funds once offered cocktails of stratospheric rewards and giddying risks to investors rich enough to spare a million dollars or more. The industry has changed, although its rakish image remains. Since the bear market set in, hedge funds have produced solid rather than spectacular returns. And they are no longer the preserve of the very wealthy. Mainly through outfits known as funds of funds, institutional investors and less rich (if, in the main, still pretty well-off) individuals are being offered a taste of the hedge funds' glamour. As their name suggests, funds of funds spread their clients' money among several hedge funds. The idea is that investors will enjoy the fat returns that hedge funds can bring, but that diversification will diminish the risk. Not surprisingly, an increasing number of investors are attracted by this notion. However, the rewards have so far been disappointing.
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