A hedge fund is an investment partnership that repairs a portfolio of investment to produce returns through risk management strategies. A mutual fund is an investment cycle with a large number of investors for exploited the advantage of diversification. The hedge fund is very wobbly as compared to mutual fund. In this article we will talk about the key difference between hedge fund and mutual fund. Hedge fund and mutual fund have seven differences, let’s see below –
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- Hedge fund administrated much more allowed than mutual fund counterparts. They are capable to seize a place in derivative securities such as alternatives and have the capability to short tell stocks. This naturally enlarges the leverage. This means it is easy for hedge funds to earn money when the market is failing. On the other hand, mutual funds are not allowed to get highly leveraged places and naturally safer as a result.
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- The key difference between hedge funds and mutual funds is their presence. Hedge funds are available only for a particular group of complicated investors with net worth while mutual funds are available for everyone. Mutual fund and hedge fund are an investment process that will puddle in money from investors with the purpose of multiplying in a quick and reliable time and level of risk.
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- Unlike mutual funds, the hedge funds administer active manage investment portfolio with a objective of obvious returns. They perform their trading strategies with no dependent than a mutual fund. Hedge fund comes under an unregistered private investment that needs investors. Mutual fund administers invest the money in bonds, stocks, and debt.
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- Mutual funds are also affordable if you prefer a fund manager to manage your money as compared to a hedge fund. Hedge funds are not an easy task to value since it is difficult to decide the sure value. A hedge fund manager charges a fast performance fee.
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- Hedge funds are normalized loosely than a mutual fund that’s why mutual funds are said to be a safe investment. The hedge fund is very large whereas mutual fund is much smaller. Hedge funds are very aggressive with the strategies and risk is also very high while the mutual fund is less aggressive and risk is very low.
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- In the hedge fund, managers make modification in strategies to be fit, sell short, and leverage. In a mutual fund, the manager has to hold to the strategy at the initial process. Hedge fund provides limited information to the investors while mutual fund gives public disclosure of epitome needed on a regular basis.
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- The future destination of a hedge fund is to increase returns from the investments whereas the future destination of the mutual fund is to produce returns over the risk-free rate of returns. Hedge fund holds a share of the fund through investment while mutual funds managers are not needed to invest in the fund.
We can say that hedge fund management charges are based on the performance of products and generally work as annual management fees and 20% of net profit. When it comes to the mutual fund, management charges are based on a percentage of items managed.