Hedge Funds : Hedge Fund Essay

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Hedge funds, like mutual funds, searches for investors’ money and then invest the money to make a positive return. They typically are more flexible than mutual funds and seek more profit in different types of markets by using leverage (borrowing to increase investment exposure). Hedge funds not responsible for some of the regulations that are created to protect investors, unlike mutual funds. Some hedge fund managers may sometimes not be required to register or file reports to the SEC but they are responsible to the same prohibitions against fraud. The investors do not obtain most of federal and state law protections that is usually applied to most mutual funds. For example, hedge funds that are not required to give the same level of disclosure as mutual funds. Without this disclosure, it will be harder to completely asses the terms of an investment in a hedge fund.
Hedge funds are responsible to the same trading reporting and record keeping requirements as other investors in publicly traded securities. They are also responsible for additional restrictions and regulations. That includes a limit on the number and types of investors that each fund may have. They are restricted under a Regulation D which is under the Securities Act of 1933. Under that regulation, hedge funds are restricted to rising capital only in non-public offerings only from “accredited investors” and are restricted to individuals with a net worth minimum of $1,000,000 or income minimum of $200,000 in each
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