Mutual funds are hedge is probably

                Mutual
funds are hedge is probably

Mutual funds are hedge is probably more of a mystery. 
between mutual funds and hedge funds is that mutual funds are 
regulated. Hedge funds, on the other hand, bypass regulation by structuring
themselves to be although they are subject to antifraud standards.

 

When a hedge fund employs leverage, it borrows money to
achieve a higher return. It's the same thing that happens when an individual
buys stock on margin in a brokerage account. Leverage can also be employed by
entering "cashless" derivative transactions. This way you can invest and earn
returns greater than if you had to invest all of your cash in just stocks or
bonds.

 

This is why hedge funds are often categorized as higher
risk/higher opportunity investments, and why you hear about hedge fund blow-ups
in the media. If a fund is the market doesn't move in a favorable way, the fund
can lose a lot of money very quickly.

 

 

Hedge funds can achieve higher returns versus mutual funds

hedge funds also have the power to go short. If the mutual fund manager doesn't
like a particular company or sector, he or she can choose to not buy that
company's stock, but the fund manager can't short it and make profits as the
stock price declines.

 

Mutual funds are required to value and price their
portfolios daily in the hedge fund world; valuations may only be available on a
quarterly or monthly basis. This can be partially due to some of the more exotic
positions certain hedge funds might hold, such as over-the-counter OTC
derivatives, on which daily prices are not available.

 

In the hedge fund world, the portfolio manager also charges
a management fee. The management fee is charged in addition to a performance
fee, which can only be collected by the manager if the fund makes money.

 

The rules pertaining to the marketing of hedge funds are
very specific. Non-registered hedge funds may not solicit for contributions. The
hedge fund manager must have a pre-existing relationship with a potential

investor. It is also acceptable to be introduced by a qualified intermediary,
which may be the hedge fund's prime broker. Those that meet these requirements
are called "accredited investors" or "qualified purchasers".

 

The ability to short and employ leverage allows hedge funds
to potentially make more money than their mutual fund counterparts. But all of
the advantages of hedge funds can become a nightmare if the fund is highly
leveraged and the market moves in a direction opposite of the manager's opinion.