Hedge Funds are often the subject of a lot of discussions about the lightly regu

Question

Hedge Funds are often the subject of a lot of discussions about the lightly regulated nature of these investment firms, Interestingly, it was NOT hedge funds that were the cause of the Credit Crisis but banks and broker dealers that were heavily regulated. Please discuss a few of the key differences between hedge funds trading activities, typical investors, etc, vs traditional broker dealers or regulated mutual funds. Also, provide your opinions and rationale about whether hedge funds should become more heavily regulated going forward as US banks are for example.

Explanation / Answer

The concept of hedge funds is define as the alternative investment to use the pool of funds which employ large number of different type of strategies so as to earn good return for their investors. These are typically organized as a partnership of almost 100 investors from whom they are either institutional investors or wealthy individual.

Now there is a difference between the hedge funds trading activities vs the traditional broker dealer as discussed bellow:

Opinion and Rationale

In my opinion the hedge funds should become more heavily regulated as it helps in reducing the risk ane better retun of portfolio. The rationale includes:

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