What are the fundamental differences between mutual funds and hedge funds?
The correct answer is:
mutual funds are more strictly regulated than hedge funds
Hedge funds are more difficult to define and the value of the assets can be more difficult to calculate. They were originally developed to invest in assets that provided a hedge to the general stock market. Hedge funds have become so diverse over the years that they can invest in commodities, currencies, interest rates, futures, derivatives etc. Therefore, Hedge Funds are no longer a uniform asset class. The common denominator is not the investment strategy, but the search for absolute returns. Hedge Funds are for accredited investors. They can have lock up periods and can have specific times when they allow new investments. Hedge Funds charge a performance fee. They are more loosely regulated than mutual funds.
