New approach to risk management

Unencumbered cash is probably “the most important risk management tool at the disposal of a hedge fund,” according to a research paper from Columbia University.

The level of unencumbered cash held by the fund dictates its ability to meet margin calls and redemption requests without capitulating. From an investor’s perspective, unencumbered cash is a better measure of risk than value at risk (VaR) or a fund’s leverage ratio, according to a study by Columbia University professor Suresh Sundaresan