Differences between hedge funds and mutual funds, Financial Management

Differences between Hedge Funds and Mutual Funds

Hedge Funds are extremely flexible in their investment options because they use financial instruments generally beyond the reach of mutual funds. The latter have regulations and disclosure requirements, which largely prevent them from using short selling, leverage, concentrated investments, and derivatives. These flexible options, which include the use of hedging strategies to protect and limit the downside risk, gives Hedge Funds the ability to manage investments better.

The strong results can be linked to performance incentives in addition to investment flexibility. Unlike many mutual Fund managers, Hedge Fund managers are usually heavily invested in a significant portion of the Funds they run, and share rewards as well as risks with investors. ‘Incentive fees' remunerate Hedge Fund managers only when returns are positive, whereas mutual Funds pay their financial managers according to the volume of assets managed, regardless of performance. This incentive fee structure tends to attract many of the best practitioners and other financial experts to Hedge Fund industry. In the US, the following differences can be measured between Hedge Funds and mutual funds

 

Posted Date: 9/11/2012 2:07:10 AM | Location : United States







Related Discussions:- Differences between hedge funds and mutual funds, Assignment Help, Ask Question on Differences between hedge funds and mutual funds, Get Answer, Expert's Help, Differences between hedge funds and mutual funds Discussions

Write discussion on Differences between hedge funds and mutual funds
Your posts are moderated
Related Questions
Q. Merits of net present value method? Merits of NPV method:- (i) Time value of funds is taken into consideration: - For the reason that this method takes into account the t

applicability of an operating cycle in a vegetable growing business

who are the participants in the hedge funds industries

Takeover, Inc. is a Delaware corporation whose only stated purpose is to acquire companies.  It has virtually no assets and no employees other than the original founders who contri

Agency Mortgage-Backed Securities (AMBS) are securities that are backed by the mortgage loans. These securities include mortgage passthrough securities, stripped

Trade credit is free credit.  Do you agree or disagree with this statement?  Explain. No the Trade credit is not free.  It comprises a cost.  Who bears that cost relies on the te

What are the negative consequences of a company holding too much cash? A company holding in excess of cash would be giving up the opportunity to invest more in income producing

Q. Classification of Working Capital? Classification of Working Capital: - Working Capital is able to be classified in two ways firstly on the basis of concept and secondly on

Q. What do you mean by S Corporation? S Corporation - An S Corporation is a corporation that, under Internal Revenue Code, is normally not subject to federal income taxes. In i

Criticism of Profit Maximization Approach: (i) Ambiguous: - One practical complexity with this approach is that the term profit is ambiguous. Different people take dissimilar me