But as an investor, I'm not playing different sports. I'm looking to maximize returns while minimizing losses. A defensive team and an offensive team may have different strategies but their goal is the same: win the game.
Are you saying that "risk-adjusted maximum return" is essentially (rate of return, std. deviation), and that hedge funds are offering a lower rate of return in exchange for a lower std. deviation? Like how Treasury bonds offer (1%, 0)? I'm no hedge fund expert, but I've always assumed hedge fund claim to get higher rate of return than the S&P 500 through the brilliance of their active management (for which you pay them gobs of money). And in this experiment, over 10 years, the deviation of the S&P 500 compared to its expected average was about 0, and their returns (net fees) was about 25% the S&P 500. So even if the S&P 500 had less than average returns it would have still trounced the hedge funds.
Maximizing returns while minimizing losses is, ultimately, a meaningess phrase.
What you mean is maximizing returns under some specific risk acceptance. That risk acceptance is different between hedge funds and other funds. You choose the fund that matches the game YOU are playing.
Are you saying that "risk-adjusted maximum return" is essentially (rate of return, std. deviation), and that hedge funds are offering a lower rate of return in exchange for a lower std. deviation? Like how Treasury bonds offer (1%, 0)? I'm no hedge fund expert, but I've always assumed hedge fund claim to get higher rate of return than the S&P 500 through the brilliance of their active management (for which you pay them gobs of money). And in this experiment, over 10 years, the deviation of the S&P 500 compared to its expected average was about 0, and their returns (net fees) was about 25% the S&P 500. So even if the S&P 500 had less than average returns it would have still trounced the hedge funds.