Differences between hedge funds and mutual funds, Financial Management

Assignment Help:

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

 


Related Discussions:- Differences between hedge funds and mutual funds

State about the quick ratio - position ratios, State about the Quick ratio ...

State about the Quick ratio or acid test Quick ratio = Current assets less inventories /Current liabilities(times) This  ratio  measures  immediate  solvency  of  a  busin

Measuring interest rate risk , Investors are always interested in est...

Investors are always interested in estimating the price sensitivity of a bond to change in market interest rates. Let us study how prices change both in terms of

How industrial company inflate the value of its inventory, How can an indus...

How can an industrial company inflate the value of its inventory so as to decrease net income and the taxes is has to pay that year? If a company increases the value of its inv

State the second element of capital budgeting decision, State the second el...

State the second element of capital budgeting decision The second element of capital budgeting decision is the analysis of risk and uncertainty. As the benefits from investment

Estimate the total rate of return, Question: Explain: (a) the advant...

Question: Explain: (a) the advantages and disadvantages, to a company, of debt finance over equity finance; (b) the reasons why a company may choose to issue preference s

Firms indifference point, help me withh the calculation concept of the poin...

help me withh the calculation concept of the point where the firm is indifferent

What do you mean by financial leverage, Q. What do you mean by Financial Le...

Q. What do you mean by Financial Leverage? Financial Leverage: - The financial leverage perhaps defined as the tendency of the residual net profit to vary disproportionately wi

Explain arbitrage risk free arguments, The current market value of any real...

The current market value of any real or financial assets is the present value of the cash flows accruing to that asset discounted by a market determined risk-adjusted required rate

Company''s stock price, A company is expected to pay a dividend of D1 = $1....

A company is expected to pay a dividend of D1 = $1.25 per share at the last of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future.

What does weighted average cost of capital, What does the "weight" refer to...

What does the "weight" refer to in the weighted average cost of capital? The weight pass on to in weighted average cost of capital refers to the portion of the total capital in

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd