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Hedge Fund Vs Mutual Fund
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Hedge funds are like mutual funds in some ways. Investment professionals in a hedge fund pool in money from investors to be managed - exactly like the mutual funds do. And, subject to some minor …

Hedge funds are like mutual funds in some ways. Investment professionals in a hedge fund pool in money from investors to be managed - exactly like the mutual funds do. And, subject to some minor restrictions, investors in hedge funds can withdraw their money as they can in a mutual fund. Nothing else is similar.

Published in Economy & Finance , Business
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  • 1. Hedge Fund Vs Mutual FundHedge funds are like mutual funds in some ways. Investment professionals in ahedge fund pool in money from investors to be managed - exactly like the mutualfunds do. And, subject to some minor restrictions, investors in hedge funds canwithdraw their money as they can in a mutual fund. Nothing else is similar. Let meexplain the differences.
  • 2. Difference 1 Hedge Funds Mutual FundsFocus on absolute Focus on relative returns. Returns should be higherreturns than benchmark
  • 3. Difference 2Hedge Funds Mutual FundsCan invest in any asset class - Work within a risk controlled andstocks, bonds, commodities, compliance framework set up byreal estate, private partnerships, the regulator. Hence very risky- or exotic debt products like asset classes are prohibited forpackaged sub-prime mortgages. investment
  • 4. Difference 3 Hedge Funds Mutual FundsThey can borrow to bet They can borrow – but withinbigger and enhance SEBI guidelinesreturns.
  • 5. Difference 4 Hedge Funds Mutual FundsThey can run highly The objective is toconcentrated portfolios. protect investors’ investment and hence diversification is the key principle.
  • 6. Difference 5Hedge Funds Mutual FundsMeant for those who are already Meant for people at largerich. Hedge funds are open only to providing them with an optionaccredited investors defined as of building wealth throughthose with net worth of more than equity and debt investments.$1.5 million, or income in excess Mutual Funds allow even smallof $200,000 in each of the past investors to participate.two years. The good onesdemand $1 million or more ofinvestment.
  • 7. Difference 6Hedge Funds Mutual FundsWork on 2/20 basis which They carge 1.25% on the firstmeans they charge 2% a year 100 crores of the AUMby way of management fees managed. Annual expensesand 20% of the net profit. They can go upto 2.25% to 2.50%.do not share in losses.
  • 8. Difference 7Hedge Funds Mutual Funds Hedge Funds are virtually Mutual funds are heavilyunregulated. regulated because investor safety is the most important requirement
  • 9. Difference 8Hedge Funds Mutual Funds They are sold asThey cannot market products to enhancethemselves publicly. wealth.