Products & Their RisksQuestion 108 of 398
Compared with a registered open-end mutual fund, a hedge fund typically:
a.Offers daily redemption at NAV to all investors
b.Is subject to the same strict leverage limits as a 1940 Act fund
c.Uses aggressive strategies, may employ leverage and short selling, and often imposes lock-up periods
d.Is prohibited from charging performance-based fees
Explanation
Hedge funds pursue aggressive, flexible strategies that can include leverage, derivatives, and short selling, and they frequently charge performance-based fees and restrict withdrawals through lock-up periods. Because they are lightly regulated and can be illiquid and high-risk, they suit only sophisticated investors, unlike heavily regulated mutual funds.
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Related questions on this topic
- Which of the following is a common type of direct participation program?
- Which is a primary risk that a registered representative should disclose about most direct participation programs?
- Hedge funds are typically sold through private placements and are generally limited to:
- Under the forward pricing rule, an order to buy or redeem open-end mutual fund shares is executed at:
- A 12b-1 fee charged by a mutual fund is used to cover:
- A mutual fund's expense ratio measures:
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