Three strategies to help diversify their portfolios. : Evaluating hedge funds in the context of a diversified portfolio is fundamentally challenging, mainly due to the widely disparate investment strategies, liquidity profiles and distinct risk/return characteristics across different funds. While it is imperative to have access to the highest quality managers investing in various strategies that are complementary to an existing portfolio, the more fundamental question is: what am I looking to solve for in the context of an overall portfolio; specifically, are my clients looking for hedge funds to provide capital preservation, portfolio diversification or enhanced returns?