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  • Writer's pictureMatt DeLong

How do hedge funds merge with mutual funds?

And how are they regulated as they engage in consolidating the financial services industry?

I’ve never heard of hedge funds merging with mutual funds. Most hedge funds I’m familiar with operate under **Rule 501 of Regulation D of the Securities Act of 1933. That is to say they are hedge funds because they DON’T WANT TO OPERATE AS A MUTUAL FUND.


Typically, mutual funds allow anyone with $1,000 to invest to join their investment programs, because anyone with $1,000 is admitted, it’s is far more regulated than hedge funds. Because anyone is admitted, the types of investments they are able to make are then restricted.


Hedge funds typically only admit accredited investors** and is the diagonal opposite of mutual funds. Hedge funds are less restricted because their investors (who can join) is regulated, but they can invest in almost anything. Distressed assets, credit swaps, stocks/options, forex, commodities/futures, crypto, etc. Typically hedge funds have more returns than mutual fund, but their returns also have a wider standard deviation as well. (returns fluctuate more on a yearly basis). For this reason, the average American is not able to invest in a hedge fund because the US govt has labeled hedge funds as “risky”. But you can buy lottery tickets, LOL.


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