By Kori Eskridge, Fall 2014 Student Intern
Hedge funds are a type of investment where investors’ money is pooled and invested in an effort to make a profit. The pooled money is often invested in a variety of markets, and common investment practices include short-selling and other speculative strategies. This makes hedge funds more risky than mutual funds. According to the SEC,
“hedge funds are not subject to some of the regulations that are designed to protect investors. Depending on the amount of assets in the hedge funds advised by a manager, some hedge fund managers may not be required to register or to file public reports with the SEC. Hedge funds, however, are subject to the same prohibitions against fraud as are other market participants, and their managers owe a fiduciary duty to the funds that they manage.”
Hedge funds are not required to give the same disclosures as mutual funds, making it more difficult for investors to know what they are getting into.