“Many investors believe that hedge funds are designed to shoot the lights out, when, in fact, hedge funds are designed to hedge,” says Adam Patti, CEO of IndexIQ, a provider of exchange-traded funds and other products that replicate hedge fund performance.

The other major misconception is that hedge fund strategies are only available to the super rich. While actual hedge funds may be limited to the polo playing set, advisors are using their strategies to reduce risk in the portfolios of everyday clients.

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