Acquaint with financial markets products and services

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After getting acquaint with the financial markets products and services, CelestilaMoonn, an UMB Global Affairs major student, decided to invest in mutual funds and hedge funds; however, she sent an e-mail to an advisor in order to find out how hedge funds differ from mutual funds. Advisor tells the following about both products:

"Hedge funds are investment pools that invest funds for (wealthy) individuals and other investors (e.g., commercial banks). They are similar to mutual funds in that they are pooled investment vehicles that accept investors’ money and generally invest it on a collective basis. Hedge funds, however, are not subject to the numerous regulations that apply to mutual funds for the protection of individuals, such as regulations requiring a certain degree of liquidity, regulations requiring that mutual fund shares be redeemable at any time, regulations protecting against conflicts of interest, regulations to ensure fairness in the pricing of funds shares, disclosure regulations, and regulations limiting the use of leverage. Unlike mutual funds, the average performance fee on hedge funds is lower than the average mutual funds."

Briefly discuss should Moonn make her investment decision based on her advisor’s above clarifications.

Reference no: EM131620246

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