Hedge funds have become a major part of the investment landscape with almost $2 trillion dollars under management. The return and risk characteristics of various hedge fund strategies are reviewed in this article. Many hedge fund strategies provide unique return and risk opportunities both as stand alone investments and as additions to portfolios comprised principally of traditional stock and bond investments. However, the extent that a hedge fund strategy provides stock/bond portfolio diversification potential depends both on the statistical properties of the stock/bond portfolio as well as the hedge fund strategy itself. Empirical evidence shows that correlations of the various hedge fund strategies with traditional stock and bond investment often depend on the security markets in which hedge fund manager’s trade. The expected correlation relationships of various hedge fund strategies with a range of market factors are explored as well as the ability of multi-factor regressions to explain hedge fund returns. Empirical evidence supports the expected relationships between equity and bond market factors and hedge fund return. Results indicate that hedge fund performance changes over time such that the benefits of hedge funds as standalone or as additions to traditional portfolios depend on the unique investment environment of that period While the primary empirical results provided in this review are based on manager based hedge fund investments, passive non-manager based algorithmic models of hedge fund performances are available today which may be regarded as investible benchmarks for many hedge fund strategies. Therefore, one can think of hedge fund returns as a combination of manager skill and an underlying return to the hedge fund strategy or investment style itself. In recent years, during and after the extreme stress in financial markets, there has been a dramatic increase in the number of systematic algorithmic products that attempt to capture the risk and return of a particular asset class or fund strategy. These products may be standalone investments created to provide direct replication (e.g., almost identical securities) as comparison benchmark or they may be constructed expressly to track (similar but not identical securities) an existing noninvestable or investable benchmark. While the results in this paper may indicate similar return and risk properties between various non-investable and investable replication or tracking products, investors should remember that their primary advantage is to provide competitive after-fee returns along with superior liquidity, transparency and a reduction in exposure to manager specific risk (idiosyncratic or fraud).