Hedge funds are viewed as high-risk investments and the average investor tends to shy away from them. But they can complement and offer diversification in an investor's portfolio, according to a recent Lipper "Research Series" report, "The Role of Hedge Funds and Hedge Fund Like-Mutual Funds in a Portfolio."

"Most people view hedge funds as risky, but in reality, some hedge funds and hedge fund-like mutual funds are not as risky as equity mutual funds," said Andrew Clark, senior research analyst and author of the report for Lipper of New York.

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