Question

What are some differences between hedge funds and mutual funds?

Short answer

Hedge funds are less regulated, open to wealthy investors, allow many risks and charge higher fees.

Mutual funds are regulated, are open to small investors too, don’t allow taking many risks and charge lower fees.

Step-by-step solution

Definition

Hedge funds and Mutual funds both are means to pool investor’s money for re-investment by fund managers.

Listing of differences

Following are the differences between hedge funds and mutual funds:

Hedge Funds	Mutual Funds
1. Being part of the private partnership, they have much less regulation.	1. They are under strict regulation and supervision of SEBI.
2. Typically they are open to very wealthy or institutional investors.	2.They are open to small investors too.
3. They permit investors to take many risks.	3. They do not permit taking many risks.
4. They charge higher fees and provide less transparency to investors.	4. They charge lower fees and provide transparency to investors.