24 – L1 23 Absolute Returns V3

Hedge funds are usually evaluated by absolute returns. Absolute return funds use the cash interest rate such as the US three-month Treasury rate or LIBOR as the benchmark. Since the cash rate is relatively small, it doesn’t fluctuate much compared to the equity markets. Absolute return funds are measured by their returns themselves, not the difference between the fund and the benchmark returns. The average return of hedge funds in 2017 was 8.5 percent, and 5.4 percent in 2016, according to the Hedge Fund Research group.

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