Question

What are the differences between Hedge Funds and Mutual Funds? Specify the differences with respect to each of these four areas:
A. Investors
B. Regulation
C. Fees for managers
D. Risks and Investment Strategies

Answer 1

Answer:

Hedge Fund - The hedge fund is a portfolio of investments, in which few qualified wealthy investors pool their money to buy assets.

Mutual Fund- A trust where savings of several investors are pooled together to purchase a diversified basket of securities at low cost.

Basis for comparision	Hedge Funds	Mutual Funds
Investors	A significantly higher minimum investment is required from hedge fund investors. Certain hedge funds only may accept investments from individuals who hold at least $5 million in investments. This measure is intended to limit participation in hedge funds. Pension Fund, Endowment Fund, High net worth individuals can invest in Hedge Funds.	Minimum investment to open an account with the fund company is around $ 1000, but it can also be lower. After the account has been opened there is no minimum limit. Investor can invest in mutual funds as per his capability. Retail Investors can invest in Mutual Funds.
Regulation	There is less regulation. No need to register with the SEC, Furthermore, hedge funds are not required to make peroidic reports under the Securities Exchange Act, 1934	There is strict rules and regulation. Mutual Funds are investment companies that must register with the U.S Securities and Exchange Commission (SEC) and as such are subject to rigorous regulatory oversight.
Fees for managers	There is fees on the basis of performance. Hedge Fund manager charges an asset based fee and a performance fee.	Mutual Fund Manager charges fees on the basis of percentage of asset managed. Mutual fund fees and expenses are disclosed in detail as required by law, in a fee table at the front of every prospectus.
Risk and Investment Strategies	It is risky investment strategies as it is unregistered investment.It is not subject to SEC reristration and disclosure requirements.	It is less riskier as it is regulated by Securities and Exchange Commission.