Question

Section 3.6: Contrasting Hedge Funds Against Money Market Funds Explain how hedge funds differ from money market funds.

Answer 1

The hedge funds and the money market funds, both are belonging to a managed portfolios. The money market funds also called as mutual funds. Both the hedge and mutual funds having the same goal to achieve returns through the variegation.

The major difference of hedge funds from money market fund is that, the hedge fund is ready to took a high risk position by aiming large returns for their investors. For accomplish this goal, the hedge funds make use of options like short selling, leverage and other possible approaches. As compared to it's mutual fund counterparts, the hedge funds commonly try to organise more insistently. The structure and regulation of hedge funds are designed completely different from the mutual funds. The investments of hedge funds will be offer privately. So it allows only accredited investors. Then it builds fund structure for these investors. The hedge funds are more flexible in their investing and investor provisions because of it's private nature. As compared to hedge funds, the mutual funds are public in nature and they are not dealing with the high risk positions. Because of limited involvement of high risk positions in the mutual funds, it is suitable for the mass investing public. The mutual fund will be having a public and transparent nature. While the hedge funds are having private nature.