1. Regulation: Hedge funds operate with less regulatory oversight compared to
mutual funds. Mutual funds are subject to strict regulations to protect the
interests of retail investors, making them more transparent and standardized.
2. Investor Eligibility: Hedge funds are typically open only to accredited investors,
who must meet specific income and net worth requirements. Mutual funds, on the
other hand, are accessible to a broader range of investors, including retail
investors.
3. Investment
Strategies: Hedge funds employ a wide
range of strategies, including long/short positions, derivatives trading, and
leveraging, to maximize returns. Mutual funds, while diverse in their
investment options, generally follow more traditional strategies, focusing on
long-term growth or income.
4. Fees: Hedge funds typically apply a dual fee structure, encompassing
both management fees and performance fees. Management fees are calculated as a
percentage of the total assets under management, while performance fees are a
percentage of the profits. Mutual funds usually charge management fees, but
their fee structures are more straightforward and transparent.