Risk Management in Hedge Funds

In the world of alternative investments, effective risk management is crucial for achieving desired returns while minimizing potential losses. Investors often deploy different strategies to manage risks associated with their investment portfolios. Understanding these strategies is essential for evaluating alternative investments.

Consider the following scenario: An investor is evaluating a hedge fund that employs both long and short equity positions to mitigate market risk and volatility. The hedge fund aims to produce a consistent return regardless of market conditions.

Which of the following risk management techniques is likely being utilized by this hedge fund?