Active vs Passive

Strategy Risk vs Asset Risk

Alternative Title: How to Avoid Bad Manager Timing

Strategy Risk: If you own a black-box ‘go-anywhere’ hedge fund that invests long and short, uses futures and derivatives at any frequencies, you are mostly exposed to the strategy risk.

Asset Risk: On the other hand, if you buy and hold S&P500 for the long-run, you are mostly exposed to the underlying asset risk.