Investments, tenth edition

    

   

  Transparency   

Mutual funds are subject to the Securities Act of 1933 and the Invest-

ment Company Act of 1940 (designed to protect unsophisticated investors), which require 

transparency and predictability of strategy. They periodically must provide the public with 

information on portfolio composition. In contrast, hedge funds usually are set up as limited 

liability partnerships, and provide minimal information about portfolio composition and 

strategy to their investors only.  

  Investors   

Hedge funds traditionally have no more than 100 “sophisticated” investors, 

in practice usually defined by minimum net worth and income requirements. They gener-

ally do not advertise to the general public, and minimum investments usually are between 

$250,000 and $1 million.