What is the difference between hedge fund and mutual fund?
Here's a list of differences for a hedge fund vs mutual fund:
1. Regulation: Hedge funds enjoy much less regulation than mutual funds. This means the freedom to engage in more risky market behavior to achieve higher returns.
2. Leverage: Due to fewer regulations, hedge funds can often take highly leveraged positions that are not available to mutual funds. This of course means more risk.
3. Exotic Investments. Hedge funds are free to invest in virtually anything from stocks to exotic derivatives, swaps, options and other securities. Mutual funds on the other hand are mostly limited to stocks and bonds.
4. Target Audience. Hedge funds are only open to accredited investors and high net-worth individuals willing to take the risk. Mutual funds on the other hand are usually easy to invest in and open to the general public.
Hedge funds are risky alternative investment vehicles that aggressively target absolute returns through long-short or quantitative strategies.
Mutual funds are more traditional investment institutions that aim to perform similar to market benchmarks through a well diversified portfolio.