Hedge Funds Explained: Risk, Returns & Due Diligence with Stephen J. Brown, PhD

In this episode of the Financial Thought Exchange, Lotta Moberg, CFA, PhD, speaks with Stephen J. Brown, PhD, Emeritus Professor of Finance at Monash University in Australia and at the Stern School of Business at New York University, and winner of the CFA Institute Research Foundation 2025 James R. Vertin Research Award.

Brown discusses the origins of hedge funds, their role as liquidity providers, and why their performance often disappoints relative to public markets. He explains how hedge fund risk differs from traditional market risk, the limits of diversification, and why rigorous due diligence is essential. The conversation also explores his research on sensation‑seeking behavior among hedge fund managers and its implications for risk‑adjusted returns.

Related research by Stephen J. Brown:

• Why Hedge Funds

https://www.tandfonline.com/doi/full/10.2469/faj.v72.n6.6

• Sensation Seeking and Hedge Funds

https://www.jstor.org/stable/26656034