{
  "id": 40040,
  "date": "2021-12-02T13:58:00",
  "date_gmt": "2021-12-02T18:58:00",
  "guid": { "rendered": "https:\/\/finance-able.com\/?p=40040" },
  "modified": "2025-12-21T16:55:12",
  "modified_gmt": "2025-12-21T21:55:12",
  "slug": "hedge-fund-vs-mutual-fund",
  "status": "publish",
  "type": "post",
  "link": "https:\/\/finance-able.com\/hedge-fund-vs-mutual-fund\/",
  "title": {
    "rendered": "Hedge Funds vs Mutual Funds Made Easy \u2013 Ultimate Guide"
  },
  "content": {
    "rendered": "\n<p style=\"font-size:18.5px\">Want to understand how&nbsp;<strong>Hedge Funds vs Mutual Funds<\/strong>&nbsp;operate with&nbsp;<strong>simple, visual, and Plain-English explanations?<\/strong>&nbsp;After reading this article, you\u2019ll understand:<\/p>\n\n\n\n<div class=\"wp-block-advgb-list\"><ul class=\"advgblist-7aa790e9-79a2-4a77-9548-30b5b59b5e7f\">\n<li><strong>How<\/strong>&nbsp;<strong><a href=\"https:\/\/finance-able.com\/what-is-a-hedge-fund\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Hedge Funds<\/span><\/a>&nbsp;<\/strong>and<strong>&nbsp;Mutual Funds work<\/strong>.<\/li>\n\n\n\n<li>The difference between&nbsp;<strong>Going Long<\/strong>&nbsp;vs&nbsp;<strong>Going Short.<\/strong><\/li>\n\n\n\n<li><strong>How Hedge Funds<\/strong>&nbsp;lower the&nbsp;<strong>Volatility<\/strong>&nbsp;of their portfolios by&nbsp;<strong>Going Short.<\/strong><\/li>\n\n\n\n<li>The differences between&nbsp;<strong>Hedge Funds&nbsp;<\/strong>vs&nbsp;<strong>Mutual Funds: Legal<\/strong>&nbsp;<strong>Structures<\/strong>,&nbsp;<strong>Liquidity<\/strong>,&nbsp;<strong>Investors<\/strong>,&nbsp;<strong>Fee Structures<\/strong>, and&nbsp;<strong>Long-Only<\/strong>&nbsp;vs&nbsp;<strong>Long\/Short<\/strong>&nbsp;strategies.<\/li>\n\n\n\n<li>The contrast between&nbsp;<strong>Fundamental<\/strong>&nbsp;<strong>Investing&nbsp;<\/strong>vs&nbsp;<strong>Quantitative<\/strong>&nbsp;<strong>Investing<\/strong>.<\/li>\n<\/ul><\/div>\n\n\n\n<p class=\"yoast-reading-time__wrapper\"><span class=\"yoast-reading-time__icon\"><svg aria-hidden=\"true\" focusable=\"false\" data-icon=\"clock\" width=\"20\" height=\"20\" fill=\"none\" stroke=\"currentColor\" style=\"display:inline-block;vertical-align:-0.1em\" role=\"img\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 24 24\"><path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M12 8v4l3 3m6-3a9 9 0 11-18 0 9 9 0 0118 0z\"><\/path><\/svg><\/span><span class=\"yoast-reading-time__spacer\" style=\"display:inline-block;width:1em\"><\/span><span class=\"yoast-reading-time__descriptive-text\">Estimated reading time: <\/span><span class=\"yoast-reading-time__reading-time\">1<\/span><span class=\"yoast-reading-time__time-unit\"> minute<\/span><\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-tl-dr\" style=\"font-size:35px\"><strong>TL;DR<\/strong><\/h2>\n\n\n\n<div class=\"wp-block-advgb-list\"><ul class=\"advgblist-07e622aa-a5d7-49c8-bd7c-551cda377952\">\n<li><strong>Mutual Funds<\/strong>&nbsp;and&nbsp;<strong>Hedge Funds<\/strong>&nbsp;are&nbsp;<strong>Pooled Investment Vehicles<\/strong>&nbsp;that&nbsp;<strong>Invest Money<\/strong>&nbsp;in return&nbsp;<strong>for Fees<\/strong>.<\/li>\n\n\n\n<li><strong><u>Mutual Fund Characteristics<\/u><\/strong>:<ul><li><strong>Highly-Regulated Corporations<\/strong>.<\/li><li>Offer&nbsp;<strong>high<\/strong>&nbsp;levels of&nbsp;<strong>Liquidity<\/strong>.<\/li><li>Have a&nbsp;<strong>large number<\/strong>&nbsp;of&nbsp;<strong>Retail Investors<\/strong>.<\/li><li>Charge only&nbsp;<strong>Management Fees<\/strong>.<\/li><li>Typically employ a&nbsp;<strong>Long-Only&nbsp;<\/strong>investment strategy<strong>.<\/strong><\/li><\/ul><\/li>\n\n\n\n<li><strong><u>Hedge Fund Characteristics<\/u>:<\/strong><ul><li><strong>Lightly-Regulated Partnerships<\/strong>.<\/li><\/ul><ul><li>Offer&nbsp;<strong>limited Liquidity<\/strong>.<\/li><li>Have&nbsp;<strong>sophisticated investors<\/strong>.<\/li><li><strong>Collect<\/strong>&nbsp;both&nbsp;<strong>Management Fees<\/strong>&nbsp;and a&nbsp;<strong>share of the profit<\/strong>&nbsp;(called<strong>&nbsp;\u2018Carried Interest\u2019<\/strong>).<\/li><\/ul><\/li>\n\n\n\n<li>Typically&nbsp;<strong>Go Long and Short<\/strong>&nbsp;to reduce the&nbsp;<strong>Volatility<\/strong>&nbsp;of their portfolios.<\/li>\n\n\n\n<li><strong>Hedge Funds and Mutual&nbsp;<\/strong>funds typically invest based on underlying business performance (<strong>Fundamental<\/strong>&nbsp;<strong>Investing<\/strong>) or based on complex algorithms (<strong>Quantitative<\/strong>&nbsp;<strong>Investing<\/strong>).<\/li>\n<\/ul><\/div>\n\n\n\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-9d6595d7 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:100%\">\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\"><\/div><\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-columns containerwidth is-layout-flex wp-container-core-columns-is-layout-9d6595d7 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:100%\"><div class=\"kb-row-layout-wrap kb-row-layout-id40040_a150a3-c7 alignnone wp-block-kadence-rowlayout\"><div class=\"kt-row-column-wrap kt-has-1-columns kt-row-layout-equal kt-tab-layout-inherit kt-mobile-layout-row kt-row-valign-top\">\n\n<div class=\"wp-block-kadence-column kadence-column40040_1d1fbd-ef inner-column-1\"><div class=\"kt-inside-inner-col\">\n<h2 class=\"wp-block-heading\" id=\"h-want-to-learn-more-about-finance\" style=\"font-size:35px\"><strong>Want To Learn More About Finance?<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18px\"><strong>Check out all of our (free) deep-dive articles in our<\/strong> <a href=\"https:\/\/finance-able.com\/analyst-starter-kit\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Analyst Starter Kit<\/span><\/strong><\/a>:<\/p>\n\n\n<div class=\" wp-block-kadence-portfoliogrid kb-blocks-portfolio-loop-block alignnone kb-portfolio-loop40040_3ac5cd-48 kb-portfolio-grid-layout-carousel kt-blocks-carousel \"><div class=\" kb-portfolio-grid-layout-carousel-wrap kt-post-grid-layout-carousel-wrap kt-carousel-arrowstyle-whiteondark kt-carousel-dotstyle-dark splide kb-blocks-portfolio-img-hover-zoomout kb-blocks-portfolio-content-hover-zoomin\" data-columns-xxl=\"3\" data-columns-xl=\"3\" data-columns-md=\"3\" data-columns-sm=\"2\" data-columns-xs=\"1\" data-columns-ss=\"1\" data-slider-center-mode=\"false\" data-slider-type=\"carousel\" data-slider-anim-speed=\"400\" data-slider-scroll=\"1\" data-slider-dots=\"true\" data-slider-arrows=\"true\" data-slider-hover-pause=\"false\" data-slider-auto=\"true\" data-slider-center-mode=\"false\" data-slider-speed=\"7000\" data-show-pause-button=\"false\" data-slider-gap=\"30\" data-slider-gap-tablet=\"30\" data-slider-gap-mobile=\"30\" data-slider-gap-unit=\"px\" data-item-selector=\".kb-portfolio-masonry-item\"><div class=\"kadence-splide-slider-init splide__track\"><ul><li class=\"kb-portfolio-slider-item kb-slide-item\"><div class=\"kb-blocks-portfolio-grid-item\"><div class=\"kb-blocks-portfolio-grid-item-inner-wrap kb-feat-image-align-none\"><div class=\"kadence-portfolio-image\"><div class=\"kadence-portfolio-image-intrisic kt-image-ratio-nocrop\" style=\"padding-bottom:56.25%\"><div class=\"kadence-portfolio-image-inner-intrisic\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb-1024x576.png\" class=\"attachment-large size-large wp-post-image\" alt=\"An image of a lightbulb with the text Unlevered Beta Formula\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/div><\/div><\/div><div class=\"kb-portfolio-grid-item-inner\"><a href=\"https:\/\/finance-able.com\/unlevered-beta-formula\/\" aria-label=\"Unlevered Beta Formula &#8211; Ultimate Guide\" class=\"portfolio-hover-item-link\"><\/a><div class=\"kb-portfolio-overlay-color\"><\/div><div class=\"kb-portfolio-overlay-border\"><\/div><div class=\"kb-portfolio-content-item-inner\"><h3 class=\"entry-title kb-portfolio-loop-title\">Unlevered Beta Formula &#8211; Ultimate Guide<\/h3><\/div><\/div><\/div><\/div><\/li><li class=\"kb-portfolio-slider-item kb-slide-item\"><div class=\"kb-blocks-portfolio-grid-item\"><div class=\"kb-blocks-portfolio-grid-item-inner-wrap kb-feat-image-align-none\"><div class=\"kadence-portfolio-image\"><div class=\"kadence-portfolio-image-intrisic kt-image-ratio-nocrop\" style=\"padding-bottom:56.25%\"><div class=\"kadence-portfolio-image-inner-intrisic\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation-1024x576.png\" class=\"attachment-large size-large wp-post-image\" alt=\"A lightbulb and the words Purchase Price Allocation\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/div><\/div><\/div><div class=\"kb-portfolio-grid-item-inner\"><a href=\"https:\/\/finance-able.com\/purchase-price-allocation\/\" aria-label=\"Purchase Price Allocation in 4 Steps &#8211; The Ultimate Guide\" class=\"portfolio-hover-item-link\"><\/a><div class=\"kb-portfolio-overlay-color\"><\/div><div class=\"kb-portfolio-overlay-border\"><\/div><div class=\"kb-portfolio-content-item-inner\"><h3 class=\"entry-title kb-portfolio-loop-title\">Purchase Price Allocation in 4 Steps &#8211; The Ultimate Guide<\/h3><\/div><\/div><\/div><\/div><\/li><li class=\"kb-portfolio-slider-item kb-slide-item\"><div class=\"kb-blocks-portfolio-grid-item\"><div class=\"kb-blocks-portfolio-grid-item-inner-wrap kb-feat-image-align-none\"><div class=\"kadence-portfolio-image\"><div class=\"kadence-portfolio-image-intrisic kt-image-ratio-nocrop\" style=\"padding-bottom:45.138888888889%\"><div class=\"kadence-portfolio-image-inner-intrisic\"><img loading=\"lazy\" decoding=\"async\" width=\"720\" height=\"325\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1.png\" class=\"attachment-large size-large wp-post-image\" alt=\": A stick figure answering an interview question with the title text &#039;Walk Me Through an LBO&#039; below\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1.png 720w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-300x135.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-400x181.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-624x282.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-50x23.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-100x45.png 100w\" sizes=\"auto, (max-width: 720px) 100vw, 720px\" \/><\/div><\/div><\/div><div class=\"kb-portfolio-grid-item-inner\"><a href=\"https:\/\/finance-able.com\/walk-me-through-a-dcf\/\" aria-label=\"Walk Me Through a DCF in 5 Steps &#8211; The Ultimate Guide\" class=\"portfolio-hover-item-link\"><\/a><div class=\"kb-portfolio-overlay-color\"><\/div><div class=\"kb-portfolio-overlay-border\"><\/div><div class=\"kb-portfolio-content-item-inner\"><h3 class=\"entry-title kb-portfolio-loop-title\">Walk Me Through a DCF in 5 Steps &#8211; The Ultimate Guide<\/h3><\/div><\/div><\/div><\/div><\/li><\/ul><\/div><div class=\"clearfix\" style=\"clear:both\"><\/div><\/div><\/div><\/div><\/div>\n\n<\/div><\/div><\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-hedge-funds-a-common-source-of-confusion\" style=\"font-size:35px\"><strong>Hedge Funds\u2026A Common Source of Confusion<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\">The <strong>Finance<\/strong> world is filled with a variety of <strong>confusing<\/strong> and <strong>ambiguous<\/strong> terms.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/2-Confused-Stick-Figure-1024x576.png\" alt=\"Image of Stick Figure while doing research on hedge fund vs mutual fund\" class=\"wp-image-40057\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/2-Confused-Stick-Figure-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/2-Confused-Stick-Figure-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/2-Confused-Stick-Figure-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/2-Confused-Stick-Figure-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/2-Confused-Stick-Figure-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/2-Confused-Stick-Figure-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/2-Confused-Stick-Figure-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/2-Confused-Stick-Figure.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">The term <strong>&#8216;<a href=\"https:\/\/finance-able.com\/what-is-a-hedge-fund\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Hedge Fund<\/span><\/a>&#8216;<\/strong> might be <strong>near or at the top of that list<\/strong>. This is <strong>because<\/strong> there are <strong>so many different types<\/strong> of <strong>Hedge Funds<\/strong> that it is <strong>hard to summarize<\/strong> their activities.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">By contrast, <strong>Mutual Funds<\/strong> are often <strong>much more familiar<\/strong> to many people because they have <strong>Mutual Fund<\/strong> investments <strong>in their savings and retirement accounts<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">As we&#8217;ll see, though, <strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong> take very <strong>similar approaches<\/strong> to <strong>Investing<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">With that said, <strong>let&#8217;s start<\/strong> with the <strong>primary differences<\/strong> between a <strong>Hedge Fund <\/strong>and a<strong> Mutual Fund<\/strong>.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-key-differences-between-hedge-funds-and-mutual-funds\" style=\"font-size:35px\"><strong>Key Differences Between Hedge Funds and Mutual Funds<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"624\" height=\"352\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/hedge-fund-vs-mutual-funds-list.png\" alt=\"List of the 5 key Difference Between Hedge Funds vs Mutual Funds\" class=\"wp-image-40078\" style=\"width:624px;height:352px\" title=\"Hedge Fund vs Mutual Fund Key Differences\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/hedge-fund-vs-mutual-funds-list.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/hedge-fund-vs-mutual-funds-list-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/hedge-fund-vs-mutual-funds-list-400x226.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/hedge-fund-vs-mutual-funds-list-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/hedge-fund-vs-mutual-funds-list-100x56.png 100w\" sizes=\"auto, (max-width: 624px) 100vw, 624px\" \/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:18.5px\">There are <strong>a few major differences<\/strong> between <strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong>:<br> 1. <strong>Fund Structure<\/strong><br> 2. <strong>Liquidity<\/strong><br> 3. <strong>Types of Investors<\/strong><br> 4. <strong>Fee Structure<\/strong><br> 5. <strong>Long-Only vs Long\/Short<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">Once we&#8217;ve covered these differences, we&#8217;ll dive into the <strong>Investment Strategies<\/strong> used by <strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong>.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-hedge-funds-vs-mutual-funds-difference-1-fund-structure\" style=\"font-size:26px\"><strong>Hedge Funds vs Mutual Funds Difference #1: Fund Structure<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/4-Difference-1-Fund-Structure-1024x576.png\" alt=\"An Image showing Hedge Funds as Lightly Regulated Partnerships and Mutual Funds as Regulated Corporations\" class=\"wp-image-40046\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/4-Difference-1-Fund-Structure-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/4-Difference-1-Fund-Structure-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/4-Difference-1-Fund-Structure-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/4-Difference-1-Fund-Structure-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/4-Difference-1-Fund-Structure-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/4-Difference-1-Fund-Structure-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/4-Difference-1-Fund-Structure-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/4-Difference-1-Fund-Structure.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong> are both <strong>&#8216;Pooled Investment Vehicles.&#8217;<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">In other words, these funds both <strong>take<\/strong> <strong>Money<\/strong> from a <strong>broad group of Investors<\/strong> and <strong>aggregate<\/strong> the <strong>Money<\/strong> into a single <strong>&#8216;Fund.&#8217;<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">The <strong>&#8216;Fund Managers&#8217;<\/strong> who oversee the <strong>Fund<\/strong> then invest the <strong>Money<\/strong> on behalf of the <strong>Investors<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">These <strong>Funds<\/strong> can invest in a <strong>wide range<\/strong> <strong>of Investments<\/strong> and <strong>employ<\/strong> <strong>various Investment Strategies<\/strong>, as we discuss later in this article. With that said, <strong>most Funds<\/strong> have a <strong>fairly narrow area of focus<\/strong> (e.g., <strong>US Growth Stocks<\/strong>, <strong>Emerging Market Bonds, <\/strong>etc.).<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Despite these similarities, <strong>Hedge Funds<\/strong> and <strong>Mutual funds<\/strong> operate under very <strong>different Legal <\/strong>and <strong>Regulatory structures<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Hedge Funds<\/strong> typically operate as a <strong>Partnership<\/strong> between the <strong>Fund Manager<\/strong> and their <strong>Investors<\/strong>. Also, <strong>Hedge Funds<\/strong> are <strong>not heavily regulated,<\/strong> and so they have much <strong>more latitude<\/strong> to make <strong>riskier investments,<\/strong> as we&#8217;ll see shortly.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">By contrast, <strong>Mutual Funds<\/strong> are typically set up as <strong>Corporations<\/strong> which the <strong>US Government regulates<\/strong> under the <strong><a href=\"https:\/\/www.investopedia.com\/terms\/i\/investmentcompanyact.asp\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Investment Company Act of 1940<\/span><\/a><\/strong>. <strong>Mutual Funds<\/strong> are <strong>subject<\/strong> to <strong>stringent regulation<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In short, the <strong>Hedge Funds rules<\/strong> are <strong>very different<\/strong> from the <strong>rules<\/strong> <strong>for<\/strong> <strong>Mutual Funds<\/strong>.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n<!-- This site is converting visitors into subscribers and customers with OptinMonster - https:\/\/optinmonster.com :: Campaign Title: Hedge Funds vs Mutual Funds Made Easy - Obfuscation -->\n<div id=\"om-ng7le5p6b5wxhhuzes9c-holder\"><\/div>\n<script>(function(d,u,ac){var s=d.createElement('script');s.type='text\/javascript';s.src='https:\/\/a.omappapi.com\/app\/js\/api.min.js';s.async=true;s.dataset.user=u;s.dataset.campaign=ac;d.getElementsByTagName('head')[0].appendChild(s);})(document,130718,'ng7le5p6b5wxhhuzes9c');<\/script>\n<!-- \/ OptinMonster -->\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-hedge-funds-vs-mutual-funds-difference-2-liquidity\" style=\"font-size:26px\"><strong>Hedge Funds vs Mutual Funds Difference #2: Liquidity<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/5-Difference-2-Liquidity-1024x576.png\" alt=\"An Image Showing Hedge Funds as Illiquid and Mutual Funds as very Liquid\" class=\"wp-image-40047\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/5-Difference-2-Liquidity-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/5-Difference-2-Liquidity-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/5-Difference-2-Liquidity-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/5-Difference-2-Liquidity-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/5-Difference-2-Liquidity-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/5-Difference-2-Liquidity-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/5-Difference-2-Liquidity-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/5-Difference-2-Liquidity.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">As mentioned above, <strong>Mutual Funds<\/strong> are <strong>heavily regulated<\/strong> and <strong>must provide<\/strong> their <strong>Investors the ability to sell<\/strong> on a <strong>daily basis<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong><a href=\"https:\/\/finance-able.com\/what-is-a-hedge-fund\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Hedge Funds<\/span><\/a> <\/strong>are<strong> lightly regulated<\/strong> and <strong>don&#8217;t<\/strong> typically <strong>have liquidity constraints<\/strong>. As a result, <strong>Investors<\/strong> in a <strong>Hedge Fund<\/strong> may only be <strong>able to<\/strong> <strong>exit their Investment quarterly<\/strong> or <strong>sometimes<\/strong> for a <strong>far longer period of time<\/strong>.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-hedge-funds-vs-mutual-funds-difference-3-types-of-investors\" style=\"font-size:26px\"><strong>Hedge Funds vs Mutual Funds Difference #3: Types of Investors<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/6-Difference-3-Types-of-Investors-1024x576.png\" alt=\"An Image showing Hedge Funds with Large Sophisticated Investors and Mutual Funds with Small Retail Investors\" class=\"wp-image-40048\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/6-Difference-3-Types-of-Investors-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/6-Difference-3-Types-of-Investors-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/6-Difference-3-Types-of-Investors-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/6-Difference-3-Types-of-Investors-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/6-Difference-3-Types-of-Investors-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/6-Difference-3-Types-of-Investors-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/6-Difference-3-Types-of-Investors-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/6-Difference-3-Types-of-Investors.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Mutual Funds<\/strong> are open to the <strong>general public<\/strong> (i.e., <strong>&#8216;Retail Investors&#8217;<\/strong>) and typically <strong>don&#8217;t employ<\/strong> highly <strong>risky investment strategies<\/strong>. As a result, <strong>Retail Investors <\/strong>compose a <strong>large segment<\/strong> of the <strong>Mutual Fund<\/strong> <strong>Investor Base<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In contrast, <strong>Hedge Funds <\/strong>employ <strong>much riskier Investment Strategies.<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">As a result,<strong> Hedge Funds<\/strong> are typically <strong>only open to individuals<\/strong> with <strong>significant<\/strong> levels of <strong>income<\/strong> or <strong>savings<\/strong> (i.e., &#8216;<strong><a href=\"https:\/\/www.investopedia.com\/terms\/a\/accreditedinvestor.asp\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Accredited Investors<\/span><\/a><\/strong>&#8216;) or <strong>large<\/strong>, <strong>sophisticated institutions<\/strong> with significant Investment experience.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In addition, the<strong> Hedge Fund minimum Investment <\/strong>is<strong> very high, <\/strong>typically<strong> $5-10 million or more.<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">As such, <strong>Hedge Fund<\/strong> investors tend to be <strong>Wealthy Individuals<\/strong> (i.e. &#8216;High Net Worth), <strong>Pensions<\/strong>, <strong>University Endowments<\/strong>, <strong>Foundations,<\/strong> and <strong>Insurance Companies<\/strong>.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-hedge-funds-vs-mutual-funds-difference-4-fee-structures\" style=\"font-size:26px\"><strong>Hedge Funds vs Mutual Funds Difference #4: Fee Structures<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/7-Difference-4-Fee-Structure-1024x576.png\" alt=\"An Image showing Hedge Funds with Management Fee plus Carried Interest and Mutual Funds with just Management Fees\" class=\"wp-image-40049\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/7-Difference-4-Fee-Structure-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/7-Difference-4-Fee-Structure-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/7-Difference-4-Fee-Structure-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/7-Difference-4-Fee-Structure-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/7-Difference-4-Fee-Structure-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/7-Difference-4-Fee-Structure-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/7-Difference-4-Fee-Structure-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/7-Difference-4-Fee-Structure.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Mutual Funds<\/strong> typically charge a <strong>&#8216;Management Fee&#8217;<\/strong> based on a <strong>percentage (usually 0.5-1.0%)<\/strong> of the <strong>Money<\/strong> <strong>managed<\/strong> by the Fund.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Hedge Funds<\/strong> have much <strong>more complex<\/strong> <strong>investment strategies<\/strong> and thus <strong>charge<\/strong> <strong>a higher &#8216;2 and 20&#8217; fee structure<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">The first part of &#8216;<strong>2 and 20&#8242;<\/strong> is a <strong>2%<\/strong> annual <strong>Management Fee<\/strong>. In addition, <strong>Hedge Funds<\/strong> also <strong>take<\/strong> a <strong>20%<\/strong> cut <strong>of the<\/strong> <strong>profit<\/strong> called <strong>&#8216;Carried Interest&#8217; (or simply &#8216;Carry&#8217;)<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Some of the <strong>best funds<\/strong> charge even more with <strong>Carried Interest<\/strong> rates of <strong>30% or higher<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In recent years, <strong>competition<\/strong> in the <strong>Hedge Fund<\/strong> world has <strong>caused<\/strong> these <strong>fees to compress<\/strong>, so only <strong>top-performing<\/strong> funds still <strong>receive<\/strong> the <strong>full &#8216;2 and 20&#8217; fee structure<\/strong>.<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-hedge-funds-vs-mutual-funds-difference-5-long-short-vs-long-only\" style=\"font-size:26px\"><strong>Hedge Funds vs Mutual Funds Difference #5: Long\/Short vs Long-Only<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/8-Difference-5-Long-Short-vs-Long-Only-1024x576.png\" alt=\"An Image showing Hedge Funds with Long\/Short and Mutual Funds with Long-Only strategies\" class=\"wp-image-40050\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/8-Difference-5-Long-Short-vs-Long-Only-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/8-Difference-5-Long-Short-vs-Long-Only-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/8-Difference-5-Long-Short-vs-Long-Only-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/8-Difference-5-Long-Short-vs-Long-Only-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/8-Difference-5-Long-Short-vs-Long-Only-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/8-Difference-5-Long-Short-vs-Long-Only-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/8-Difference-5-Long-Short-vs-Long-Only-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/8-Difference-5-Long-Short-vs-Long-Only.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">If you&#8217;ve perused any articles on <strong><a href=\"https:\/\/finance-able.com\/what-is-a-hedge-fund\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Hedge Funds<\/span><\/a><\/strong>, you&#8217;ve likely come across the terms <strong>Long-Only<\/strong> and <strong>Long\/Short<\/strong>. These <strong>two distinct investment strategies<\/strong> are employed by these Investment Firms.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">While there are some exceptions, <strong>Mutual Funds generally<\/strong> employ a <strong>Long-Only<\/strong> approach, whereas <strong><a href=\"https:\/\/finance-able.com\/what-is-a-hedge-fund\/\"><span class=\"has-inline-color has-black-color\">Hedge Funds<\/span><\/a><\/strong> also <strong>Go Short<\/strong> and are thus called <strong>Long\/Short<\/strong> funds.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">As we&#8217;ll discuss below, <strong>Hedge Funds<\/strong> <strong>reduce<\/strong> the <strong>Volatility<\/strong> of their portfolios by taking a <strong>Long\/Short approach<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">First though, <strong>let&#8217;s explore<\/strong> what the terms &#8216;<strong>Going Long<\/strong>&#8216; and &#8216;<strong>Going Short<\/strong>&#8216; actually mean.<\/p>\n\n\n\n<div style=\"height:60px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-going-long-works\" style=\"font-size:35px\"><strong>How &#8216;Going Long&#8217; Works<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Going Long<\/strong> is what you would likely think of with the <strong>typical purchase<\/strong> of a <a href=\"https:\/\/finance-able.com\/the-difference-between-stocks-and-bonds\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Stock<\/span><\/strong><\/a>.<br><br>Below is an example of <strong>Going Long<\/strong>:<\/p>\n\n\n\n<div class=\"wp-block-advgb-list\"><ul class=\"advgblist-32acc978-e250-4ce6-8a02-b35c7bc0e163\">\n<li><strong><u>Step 1<\/u>:<\/strong> <strong>Buy<\/strong> a Stock at <strong>$100<\/strong>.<\/li>\n\n\n\n<li><strong><u>Step 2<\/u>:<\/strong> <strong>Sell<\/strong> the Stock at <strong>$150<\/strong>, which results in a <strong>$50 Gain<\/strong>.<\/li>\n<\/ul><\/div>\n\n\n\n<p style=\"font-size:18.5px\">Conversely, if the <strong>Stock<\/strong> had <strong>declined<\/strong> in value to <strong>$50<\/strong>, the <strong>Investor<\/strong> would have generated a <strong>$50 Loss<\/strong>.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-brief-explainer-video-going-long-made-simple-32-seconds\" style=\"font-size:22px\"><strong>Brief Explainer Video: \u2018Going Long\u2019 Made Simple (32 Seconds)<\/strong><\/h4>\n\n\n\n<p style=\"font-size:18.5px\">In this <strong>quick video<\/strong> on <strong><a href=\"https:\/\/youtu.be\/i5YD7tYjghs\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Going Long<\/span><\/a><\/strong>, we walk through a <strong>simple, animated<\/strong> <strong>explanation<\/strong> of how this process works.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-going-short-works\" style=\"font-size:35px\"><strong>How &#8216;Going Short&#8217; Works<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Going Short<\/strong> is the <strong>exact opposite of the above<\/strong>. It might sound strange, but you <strong>Sell your Investment<\/strong> at the outset and close the transaction when you <strong><a href=\"https:\/\/www.investopedia.com\/terms\/b\/buytocover.asp\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Buy to Cover<\/span><\/a><\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Below is an example of <strong>Going Short<\/strong>:<\/p>\n\n\n\n<div class=\"wp-block-advgb-list\"><ul class=\"advgblist-e904d60a-1ad7-4438-82a2-77ac6f6de1b2\">\n<li><strong><u>Step 1<\/u>:<\/strong> <strong>Sell Short<\/strong> a Stock at <strong>$100<\/strong>.<\/li>\n\n\n\n<li><strong><u>Step 2<\/u>:<\/strong> <strong>Buy to Cover <\/strong>the Stock at <strong>$50<\/strong>, which results in a <strong>$50 Gain<\/strong>.<\/li>\n<\/ul><\/div>\n\n\n\n<p style=\"font-size:18.5px\">If you&#8217;d like to <strong>dive deeper<\/strong> into the <strong>mechanics of Short Selling<\/strong>, check out this article: <a href=\"https:\/\/www.investopedia.com\/terms\/s\/shortsale.asp\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Short Sales<\/span><\/strong><\/a>.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-brief-explainer-video-going-short-made-simple-25-seconds\" style=\"font-size:22px\"><strong>Brief Explainer Video: \u2018Going Short\u2019 Made Simple (25 Seconds)<\/strong><\/h4>\n\n\n\n<p style=\"font-size:18.5px\">In this <strong>quick video<\/strong> on <a href=\"https:\/\/youtu.be\/W1XQ197S2Hk\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Going Short<\/span><\/strong><\/a>, we walk through a <strong>simple, animated<\/strong> <strong>explanation<\/strong> of how this process works.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-why-do-hedge-funds-go-short\" style=\"font-size:26px\"><strong>Why do Hedge Funds Go Short?<\/strong><\/h3>\n\n\n\n<p style=\"font-size:18.5px\">As we explain in our <strong><u>Hedge Funds vs Mutual Funds in Plain English<\/u> Explainer Video<\/strong> (video link at the end of the article below), <strong>Hedge Funds<\/strong> use <strong>Shorts<\/strong> to reduce the <strong>Volatility<\/strong> of their <strong>portfolios<\/strong> while aiming to generate gains on both their <strong>Long<\/strong> and <strong>Short<\/strong> investments.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">A typical <strong>Equity<\/strong> (i.e., <strong>Stock<\/strong>) focused <strong>Hedge Fund<\/strong> will <strong>Go Long<\/strong> a group of <strong><u>undervalued<\/u><\/strong> <strong>Stocks <\/strong>and simultaneously<strong> Go Short<\/strong> a different group of <strong><u>overvalued<\/u><\/strong> <strong>Stocks<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Over time, the <strong>Fund Manager<\/strong> aims to generate gains on both its <strong>Long<\/strong> and <strong>Short Investments<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">By going <strong>Short<\/strong> and going <strong>Long,<\/strong> a group of securities, the <strong>Fund Manager<\/strong> can <strong>reduce<\/strong> the <strong>Investment portfolio&#8217;s <\/strong>day-to-day<strong> variations (i.e., Volatility)<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Volatility<\/strong> <strong>declines<\/strong> because each of the <strong>Long<\/strong> and <strong>Short portfolios<\/strong> will <strong>approximate movements of the entire market<\/strong> (<strong>assuming they aren&#8217;t too concentrated!<\/strong>) and will roughly <strong>cancel each other out<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">So, while <strong>Mutual Fund<\/strong> (i.e. <strong>Long-Only)<\/strong> investors are <strong>subject<\/strong> to the <strong>daily ups-and-downs<\/strong> of the <strong>markets<\/strong>, <strong>Hedge Funds<\/strong> (i.e. <strong>Long\/Short)<\/strong> will generally experience <strong>much less fluctuation<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>The end goal is to get the best of both worlds, high returns with lower Volatility.<\/strong><\/p>\n\n\n\n<div style=\"height:60px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-brief-explainer-video-why-do-hedge-funds-short-1-minute-21-seconds\" style=\"font-size:22px\"><strong>Brief Explainer Video: Why Do Hedge Funds Short? (1 Minute | 21 Seconds)<\/strong><\/h4>\n\n\n\n<p style=\"font-size:18.5px\">In this <strong>quick video<\/strong>, walk through a <strong>simple, animated<\/strong> <strong>explanation<\/strong> of <a href=\"https:\/\/youtu.be\/0o48hsWAw4o\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">How Hedge Funds Reduce Volatility<\/span><\/strong><\/a> by Going Short.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-hedge-funds-vs-mutual-funds-the-end-goal\" style=\"font-size:35px\"><strong>Hedge Funds vs Mutual Funds: The End Goal<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Despite the differences<\/strong> in Structure, Liquidity, Investor Base, Fee Structures, and Long-Only vs Long\/Short approaches, both <strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong> have the <strong>same underlying aim<\/strong>. They <strong>gather<\/strong> <strong>Money<\/strong> from <strong>Investors<\/strong> to <strong>generate a return<\/strong> and <strong>collect a fee<\/strong> in return for their services.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In fact, <strong><a href=\"https:\/\/finance-able.com\/what-is-a-hedge-fund\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Hedge Funds<\/span><\/a><\/strong> and <strong>Mutual Funds<\/strong> share <strong>several common threads<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In the <strong>next section<\/strong>, <strong>we&#8217;ll explore<\/strong> the <strong>similarities<\/strong> between <strong>Hedge<\/strong> <strong>Funds<\/strong> and <strong>Mutual Funds<\/strong>, including:<br> 1. <strong>Typical Investments<\/strong><br> 2. <strong>Fundamental Investing vs Quantitative Investing Strategies<\/strong><\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-hedge-fund-and-mutual-fund-investment-types\" style=\"font-size:35px\"><strong>Hedge Fund and Mutual Fund: Investment Types<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong> both invest in a <strong>wide variety<\/strong> of <strong>Investments<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/9-Hedge-Fund-and-Mutual-Fund-Types-of-Investment--1024x576.png\" alt=\"An image showing the most common types of Investments for Hedge Funds vs Mutual Funds\" class=\"wp-image-40051\" title=\"The most common types of Investments for Hedge Funds vs Mutual Funds\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/9-Hedge-Fund-and-Mutual-Fund-Types-of-Investment--1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/9-Hedge-Fund-and-Mutual-Fund-Types-of-Investment--300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/9-Hedge-Fund-and-Mutual-Fund-Types-of-Investment--768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/9-Hedge-Fund-and-Mutual-Fund-Types-of-Investment--400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/9-Hedge-Fund-and-Mutual-Fund-Types-of-Investment--624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/9-Hedge-Fund-and-Mutual-Fund-Types-of-Investment--50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/9-Hedge-Fund-and-Mutual-Fund-Types-of-Investment--100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/9-Hedge-Fund-and-Mutual-Fund-Types-of-Investment-.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p style=\"font-size:18.5px\">Below is a summary of some of the most <strong>common <\/strong>types of<strong> Investments<\/strong>:<\/p>\n\n\n\n<div class=\"wp-block-advgb-list\"><ul class=\"advgblist-d1ea1702-e5eb-40d3-baa3-99db42a43b10\">\n<li><strong>Stocks (i.e., Equity) <\/strong>\u2013 <strong>units of Ownership<\/strong> of a <strong>Company <\/strong>(e.g., Microsoft, Amazon, etc.).<\/li>\n\n\n\n<li><strong>Bonds and Loans (i.e., Debt)<\/strong> \u2013 a wide variety of instruments ranging from <strong>Debt<\/strong> issued by <strong>Companies<\/strong> (<strong>&#8216;Corporate&#8217;<\/strong>) to Debt issues by <strong>Governments<\/strong> (i.e. <strong>&#8216;Sovereign&#8217;<\/strong>). &nbsp;<\/li>\n\n\n\n<li><strong>Commodities<\/strong> \u2013 any undifferentiated raw material ranging from <strong>Oil and Gas<\/strong> to <strong>Copper<\/strong> and <strong>Iron Ore<\/strong><\/li>\n\n\n\n<li><strong>Currencies<\/strong> \u2013 <strong>Money issued by governments<\/strong> around the world<\/li>\n\n\n\n<li><strong>Derivatives <\/strong>\u2013 complex securities that <strong>&#8216;derive&#8217;<\/strong> <strong>their value<\/strong> from any other security<\/li>\n<\/ul><\/div>\n\n\n\n<p style=\"font-size:18.5px\">Both <strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong> can invest in one or more of these types of investments. &nbsp;<\/p>\n\n\n\n<p style=\"font-size:18.5px\">However, <strong>as previously mentioned<\/strong>, <strong>most funds<\/strong> have a <strong>narrow focus<\/strong> on just <strong>one or two<\/strong> of these <strong>Investment<\/strong> <strong>categories<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:20.5px\">&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-hedge-funds-and-mutual-funds-investment-strategies\" style=\"font-size:35px\"><strong>Hedge Funds and Mutual Funds: Investment Strategies<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\">Both <strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong> utilize a <strong>wide<\/strong> <strong>variety of strategies<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Broadly speaking, though, their investment strategies fall into <strong>two macro-level buckets<\/strong>: <strong>Fundamental<\/strong> <strong>Investing<\/strong> or <strong>Quantitative Investing<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/10-Fundamental-Investing-vs-Quantitative-Investing-1024x576.png\" alt=\"An Image contrasting Fundamental Investing and Quantitative Investment strategies\" class=\"wp-image-40052\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/10-Fundamental-Investing-vs-Quantitative-Investing-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/10-Fundamental-Investing-vs-Quantitative-Investing-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/10-Fundamental-Investing-vs-Quantitative-Investing-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/10-Fundamental-Investing-vs-Quantitative-Investing-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/10-Fundamental-Investing-vs-Quantitative-Investing-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/10-Fundamental-Investing-vs-Quantitative-Investing-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/10-Fundamental-Investing-vs-Quantitative-Investing-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/10-Fundamental-Investing-vs-Quantitative-Investing.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-investment-strategy-1-fundamental-investing\" style=\"font-size:26px\"><strong>Investment Strategy #1: Fundamental Investing<\/strong><\/h3>\n\n\n\n<p style=\"font-size:18.5px\">Funds that pursue a <strong>Fundamental<\/strong> <strong>Investing<\/strong> approach are generally <strong>Investing<\/strong> based on the <strong>underlying performance<\/strong> of their <strong>Investments<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">For example, if a fund invests in a <strong>Stock<\/strong>, they are making a <strong>bet<\/strong> <strong>based on<\/strong> the <strong>future direction<\/strong> of <strong>Revenue<\/strong> and <strong>Profit<\/strong> of the <strong>underlying business<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/11-Fundamental-Investing-Highlighted-1024x576.png\" alt=\"An Image highlighting the Fundamental Investment strategy\" class=\"wp-image-40053\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/11-Fundamental-Investing-Highlighted-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/11-Fundamental-Investing-Highlighted-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/11-Fundamental-Investing-Highlighted-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/11-Fundamental-Investing-Highlighted-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/11-Fundamental-Investing-Highlighted-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/11-Fundamental-Investing-Highlighted-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/11-Fundamental-Investing-Highlighted-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/11-Fundamental-Investing-Highlighted.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-fundamental-investing-value-vs-growth-investing\" style=\"font-size:22px\"><strong>Fundamental Investing: Value vs Growth Investing<\/strong><\/h4>\n\n\n\n<p style=\"font-size:18.5px\"><strong>No conversation<\/strong> on <strong>Fundamental Investing<\/strong> would be <strong>complete<\/strong> without discussing the <strong>highly contentious <\/strong>topic of <strong>Value<\/strong> vs <strong>Growth Investing<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Columbia Business School Professor <a href=\"https:\/\/www8.gsb.columbia.edu\/valueinvesting\/about\/history\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Benjamin Graham<\/span><\/a> <\/strong>pioneered the <strong>Value Investing approach<\/strong>. His most famous student, <strong>Warren Buffett<\/strong>, utilized his technique to become one of the wealthiest people in the world. Graham&#8217;s<strong> Value<\/strong> <strong>Investing approach<\/strong> is centered around <strong>buying undervalued businesses<\/strong> that would ultimately <strong>return to their underlying<\/strong> (or <strong>&#8216;Intrinsic&#8217;<\/strong>) <strong>Value<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">By contrast, <strong>Growth Investors <\/strong>look for <strong>high-growth Businesses<\/strong> that will <strong>appreciate value<\/strong> by virtue of their <strong>growth over time<\/strong>.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-fundamental-investing-special-situations-investing\" style=\"font-size:22px\"><strong>Fundamental Investing: Special Situations Investing<\/strong><\/h4>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Outside<\/strong> of traditional <strong>Growth<\/strong> or <strong>Value Investing<\/strong>, a <strong><a href=\"https:\/\/finance-able.com\/what-is-a-hedge-fund\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Hedge Fund<\/span><\/a><\/strong> or <strong>Mutual Fund<\/strong> may <strong>Invest<\/strong> based on expectations around a <strong>future event<\/strong> (e.g., the Acquisition of the Company) that they expect to occur. <strong>Investing<\/strong> <strong>based on events<\/strong> (as opposed to underlying Revenue and Profit expectations) is typically referred to as <strong>&#8216;Special Situations&#8217;<\/strong> investing. &nbsp;<\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-investment-strategy-2-quantitative-investing\" style=\"font-size:26px\"><strong>Investment Strategy #2: Quantitative Investing<\/strong><\/h3>\n\n\n\n<p style=\"font-size:18.5px\">Alternatively, funds may pursue a <strong>Quantitative<\/strong> <strong>investment strategy<\/strong>. <strong>Quantitative<\/strong> <strong>Investment<\/strong> <strong>Funds<\/strong> use everything from <strong>simple, rule-based formulas<\/strong> to <strong>deeply complex algorithms<\/strong> to drive their investment decisions.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Whereas <strong>Finance majors<\/strong> and <strong>MBAs<\/strong> composed a large portion of the <strong>Fundamental Investing <\/strong>world, <strong>Math Ph.D.&#8217;s <\/strong>rule <strong>Quantitative<\/strong> <strong>Investing<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">The inner workings of some of the top <strong>Quantitative Investment funds<\/strong> in the world are <strong>highly secretive<\/strong>, which is why <strong>Quantitative Investing strategies<\/strong> are often called <strong>&#8216;Black Box&#8217; <\/strong>investing.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/12-Quantitative-Investing-Highlighted-1024x576.png\" alt=\"An Image highlighting the Quantitative Investment strategy\" class=\"wp-image-40054\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/12-Quantitative-Investing-Highlighted-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/12-Quantitative-Investing-Highlighted-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/12-Quantitative-Investing-Highlighted-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/12-Quantitative-Investing-Highlighted-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/12-Quantitative-Investing-Highlighted-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/12-Quantitative-Investing-Highlighted-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/12-Quantitative-Investing-Highlighted-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/12-Quantitative-Investing-Highlighted.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-hedge-fund-vs-mutual-fund-wrap-up\" style=\"font-size:35px\"><strong>Hedge Fund vs Mutual Fund: Wrap-Up<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\">Hopefully, <strong>after reading this article<\/strong>, you have <strong>gained<\/strong> a <strong>much better understanding<\/strong> of how <strong>Hedge Funds vs Mutual Funds operate<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">While these funds have <strong>several key differences<\/strong>, <strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong> both <strong>gather Money<\/strong> from <strong>Investors. <\/strong>They then<strong> invest <\/strong>that Money<strong> to generate gains<\/strong> in return <strong>for a fee<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/13-Hedge-Fund-vs-Mutual-Fund-Summary-1024x576.png\" alt=\"Image showing that both Mutual Funds and Hedge Funds Investors Money in Return for a Fee\" class=\"wp-image-40055\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/13-Hedge-Fund-vs-Mutual-Fund-Summary-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/13-Hedge-Fund-vs-Mutual-Fund-Summary-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/13-Hedge-Fund-vs-Mutual-Fund-Summary-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/13-Hedge-Fund-vs-Mutual-Fund-Summary-400x225.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/13-Hedge-Fund-vs-Mutual-Fund-Summary-624x351.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/13-Hedge-Fund-vs-Mutual-Fund-Summary-50x28.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/13-Hedge-Fund-vs-Mutual-Fund-Summary-100x56.png 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/13-Hedge-Fund-vs-Mutual-Fund-Summary.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-hedge-funds-vs-mutual-funds-full-animated-explainer-video\" style=\"font-size:35px\"><strong>Hedge Funds vs Mutual Funds: Full Animated Explainer Video<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\"><strong>If you enjoyed this article<\/strong>, definitely <strong>check out<\/strong> our full <a href=\"https:\/\/youtu.be\/WPI9UxtFlTQ\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Animated Explainer Video<\/span><\/strong><\/a> below on the differences between <strong>Hedge Funds<\/strong> and <strong>Mutual Funds<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">You can find more videos just like this on our <a href=\"https:\/\/www.youtube.com\/c\/FinanceableTraining\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">YouTube Channel<\/span><\/strong><\/a>.<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-aiming-for-investment-banking-private-equity-or-investment-management\" style=\"font-size:35px\"><strong>Aiming for Investment Banking, Private Equity, or Investment Management?<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\">We have created the <strong>ultimate free resource<\/strong> for <strong>aspiring Finance Analysts<\/strong> with our <a href=\"https:\/\/finance-able.com\/analyst-starter-kit\/\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Finance Analyst Starter Kit<\/span><\/strong><\/a>.<\/p>\n\n\n\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-9d6595d7 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:100%\">\n<div class=\"wp-block-advgb-list\"><ul class=\"advgblist-ec84bad4-9661-4ba7-8059-073bf3eca7fe\">\n<li>We have <strong>Free, Plain English articles<\/strong> and <strong><a href=\"https:\/\/www.youtube.com\/playlist?list=PLJ2yVq7yYUT8u1j4SaSdk1tr-3dd62EuV\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">Animated Explainer Videos<\/mark><\/a><\/strong> on:<ul><li><strong><span style=\"text-decoration: underline;\">Who<\/span><\/strong> the <strong>core players<\/strong> (e.g. <strong><a href=\"https:\/\/finance-able.com\/what-is-an-investment-bank\/\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">Investment Banks<\/mark><\/a><\/strong> and <strong><a href=\"https:\/\/finance-able.com\/private-equity-vs-venture-capital\/\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">Private Equity<\/mark><\/a><\/strong>) are in the <strong>Finance world<\/strong> and <strong><span style=\"text-decoration: underline;\">how<\/span> they operate<\/strong>.<strong>Core mental frameworks<\/strong> for learning <strong>Valuation<\/strong> and <strong>Returns Analysis<\/strong>.Reviews of <strong>common trouble topics<\/strong> like <a href=\"https:\/\/finance-able.com\/enterprise-value-vs-equity-value\/\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><strong>Enterprise Value vs Equity Value<\/strong><\/mark><\/a> based on our <strong>experience training thousands of students<\/strong>.Detailed <strong>walkthroughs<\/strong> of <strong>common Interview Questions<\/strong> like <a href=\"https:\/\/finance-able.com\/walk-me-through-a-dcf\/\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><strong>Walk Me Through a DCF<\/strong><\/mark><\/a>.<\/li><\/ul><\/li>\n<\/ul><\/div>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" style=\"font-size:35px\"><strong>About the Author<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"alignleft size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"500\" height=\"500\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo.jpg\" alt=\"Picture of Mike Kimpel, Founder of Finance|able\" class=\"wp-image-26350\" style=\"width:266px;height:266px\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo.jpg 500w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-300x300.jpg 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-100x100.jpg 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-150x150.jpg 150w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-50x50.jpg 50w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:17px\"><a href=\"https:\/\/finance-able.com\/about\/\"><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><span style=\"text-decoration: underline;\">Mike Kimpel<\/span><\/mark><\/strong><\/a> is the <strong>Founder and CEO<\/strong> of <strong>Finance|able<\/strong>, a next-generation Finance Career Training platform. Mike has worked in Investment Banking, Private Equity, Hedge Fund, and Mutual Fund roles during his career.<\/p>\n\n\n\n<p style=\"font-size:17px\">He is an <strong>Adjunct Professor<\/strong> in <strong>Columbia Business School&#8217;s <a href=\"https:\/\/www8.gsb.columbia.edu\/valueinvesting\/coursesfaculty\/valueinvestingprogram\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><span style=\"text-decoration: underline;\">Value Investing Program<\/span><\/mark><\/a><\/strong> and leads the Finance track at <a href=\"https:\/\/www.accessdistributed.org\/\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><strong><span style=\"text-decoration: underline;\">Access Distributed<\/span><\/strong><\/mark><\/a>, a non-profit that creates access to top-tier Finance jobs for students at non-target schools from underrepresented backgrounds.<\/p>\n<\/div>\n<\/div>\n\n\n\n<div style=\"height:23px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-frequently-asked-questions-faqs\" style=\"font-size:35px\">Frequently Asked Questions (FAQs)<\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1625263872699\"><strong class=\"schema-faq-question\">What is Hedge Fund and Mutual Fund?<\/strong> <p class=\"schema-faq-answer\">Both Hedge Funds and Mutual Funds are pooled investment vehicles, but with very different characteristics.<br\/><br\/><strong>Mutual Funds <\/strong>are highly regulated Corporations that offer daily liquidity to their (primarily &#8216;Retail&#8217;) Investor base. They typically only charge fees based on a percentage of the Assets they manage (a &#8216;Management Fee&#8217;) and normally employ a Long-Only investing approach.<br\/><br\/><strong>Hedge Funds <\/strong>are lightly regulated Partnerships that typically offer quarterly (or sometimes annual) liquidity to their largely Institutional and High Net Worth Investor base. They usually charge fees based on a percentage of the Assets they manage (a &#8216;Management Fee&#8217;) and typically take a 20% cut of profit (called &#8216;Carried Interest&#8217;). Hedge Funds employ a Long\/Short investing approach.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1625263909729\"><strong class=\"schema-faq-question\">What is a Fund of Hedge Funds?<\/strong> <p class=\"schema-faq-answer\">A Fund of Hedge Funds invests in a portfolio of hedge funds on behalf of their investors.<br\/><br\/>Like the Hedge Funds they invest in, these Funds tend to charge both a base Management Fee on the Assets they manage and a cut of profit (called &#8216;Carried Interest&#8217;).<br\/><br\/>Whereas the Hedge Funds they invest in are aiming to find the best (or most mispriced) securities, a Fund of Hedge Funds is looking to invest behind the best Hedge Funds managers.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1625263914486\"><strong class=\"schema-faq-question\">How do Hedge Funds work?<\/strong> <p class=\"schema-faq-answer\"><br\/>Hedge Funds are very similar to other investment funds (e.g. Mutual Funds), but the key difference is that they &#8216;Hedge&#8217; out risk by going short. They do this to reduce volatility and make gains on both sides of their portfolio (i.e. both Long and Short investments). <\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1625263916777\"><strong class=\"schema-faq-question\">What is a Hedge Fund Manager?<\/strong> <p class=\"schema-faq-answer\">The term Hedge Fund Manager could describe one of two things: 1) a Partnership vehicle that employs a Hedge Funds investing approach or 2) the person who Manages the Partnership.  Unfortunately, these terms are often used interchangeably. <\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1625263971690\"><strong class=\"schema-faq-question\">What does a Hedge Fund Manager do?<\/strong> <p class=\"schema-faq-answer\">There are two answers to this question because &#8216;Hedge Fund Manager&#8217; could mean related, but different things: <br\/><br\/>1) Hedge Fund Manager (the Partnership entity) &#8211; this is the legal vehicle through which a Hedge Fund invests.  <br\/><br\/>2) Hedge Fund Manager (a Person) &#8211; this is the Partner (often called a Portfolio Manager) who builds and maintains relationships with investors, oversees the Hedge Fund&#8217;s Investment Strategy and its operations.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1625264002573\"><strong class=\"schema-faq-question\">Can I invest in a Hedge Fund?<\/strong> <p class=\"schema-faq-answer\">To invest in most Hedge Funds, you need to be an Accredited Investor. Also, most Hedge Funds have very high minimum investment thresholds of $5-10 million or more. <\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1625264042923\"><strong class=\"schema-faq-question\">What is a Hedge Fund in simple terms?<\/strong> <p class=\"schema-faq-answer\">A Hedge Fund is a pooled investment vehicle that aims to generate higher returns with lower volatility (i.e. create a better Risk\/Reward) by Going Short in addition to Going Long.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1625264079544\"><strong class=\"schema-faq-question\">Are Hedge Funds regulated?<\/strong> <p class=\"schema-faq-answer\">Hedge Funds are subject to much lower levels of regulations than Mutual Funds but are still regulated in terms of the types and numbers of investors they can take in. Large US Hedge Funds are also subject to SEC regulation. <\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1625264095124\"><strong class=\"schema-faq-question\">How are Mutual Funds regulated?<\/strong> <p class=\"schema-faq-answer\">Mutual Funds are primarily regulated under the Investment Company Act of 1940<\/p> <\/div> <\/div>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-related-links\" style=\"font-size:37px\"><strong>Related Links<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\">If you&#8217;re <strong>aiming for roles<\/strong> in <strong>Investment Banking<\/strong>, <strong>Private Equity,<\/strong> or <strong>Investment Management<\/strong>, check out the articles below:<\/p>\n\n\n\n<div class=\"wp-block-advgb-list\"><ul class=\"advgblist-7395fdf8-7033-4625-8153-880258f5aeaf\">\n<li><strong><a href=\"https:\/\/finance-able.com\/walk-me-through-a-dcf\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Walk Me Through a DCF &#8211; The Ultimate Guide (2021)<\/span><\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"https:\/\/finance-able.com\/learn-finance-foundational-framework\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Learn Finance ASAP #1 \u2013 The Foundational Framework<\/span><\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"https:\/\/finance-able.com\/how-to-value-a-business-made-simple\/\"><span class=\"has-inline-color has-vivid-cyan-blue-color\">Learn Finance ASAP #2 \u2013 How to Value a Business\u2026Made Simple<\/span><\/a><\/strong><\/li>\n<\/ul><\/div>\n\n\n<div class=\"yoast-breadcrumbs\"><span><span><a href=\"https:\/\/finance-able.com\/\">Home<\/a><\/span> \u00bb <span class=\"breadcrumb_last\" aria-current=\"page\">Hedge Funds vs Mutual Funds Made Easy \u2013 Ultimate Guide<\/span><\/span><\/div>\n\n\n<p><\/p>\n<style class=\"advgb-styles-renderer\">.wp-block-advgb-list 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    "rendered": "<p>Want to understand how&nbsp;Hedge Funds vs Mutual Funds&nbsp;operate with&nbsp;simple, visual, and Plain-English explanations?&nbsp;After reading this article, you\u2019ll understand: TL;DR Want To Learn More About Finance? Check out all of our (free) deep-dive articles in our Analyst Starter Kit: Hedge Funds\u2026A Common Source of Confusion The Finance world is filled with a variety of confusing and&#8230;<\/p>\n",
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