The differences between hedge funds and mutual funds are mainly reflected in the following five aspects.

1. Investor qualifications Investors in hedge funds have strict qualification restrictions. U.S. securities laws stipulate that if you participate in an individual name, your annual income must be at least US$200,000 in the past two years; if you participate in a family name, the couple must have an annual income of at least US$200,000 in the past two years.

The income must be at least US$300,000; if participating in the name of an institution, the net worth must be at least US$1 million.

New regulations were made in 1996: the number of participants was expanded from 100 to 500.

The conditions for participation are that individuals must own investment securities worth more than $5 million.

General mutual funds do not have this restriction.

2. There are no restrictions on the operation of hedge funds. There are few restrictions on investment portfolios and transactions. The main partners and managers can freely and flexibly use various investment techniques, including short selling.

Derivatives Trading and Leverage.

The operation of general mutual funds is more restricted.

3. Regulation Hedge funds are currently not regulated.

The U.S. Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940 have stipulated that institutions with less than 100 investors do not need to register with financial authorities such as the U.S. Securities and Exchange Commission when they are established, and are exempt from regulation.

Because investors are mainly a small number of very sophisticated and wealthy individuals with strong self-protection capabilities.

In contrast, the supervision of mutual funds is relatively strict. This is mainly because investors are ordinary people and many people lack the necessary understanding of the market. In order to avoid public risks, protect the weak and ensure social security,

Implement strict supervision.

4. Financing methods Hedge funds are generally initiated through private placement, and securities laws stipulate that they must not use any media to advertise when attracting customers.

Investors mainly participate in four ways: based on the so-called "reliable investment information" obtained in the upper class; directly knowing the manager of a hedge fund; transferring in through other funds; and through investment banks.

Special introduction to securities intermediary companies or investment consulting companies.

In general, mutual funds are mostly raised through public offerings and advertised publicly to entertain customers.

5. Whether it is possible to set up a hedge fund. Offshore funds are usually established. The advantage is that they can avoid the restrictions on the number of investors and tax avoidance under US law.

Typically located in tax havens such as Virgin Island, the Bahamas, Bermuda, Cayman Island, Dublin and Luxembourg, where taxes are minimal.

Of the $68 billion in hedge funds counted in November 1996, $31.7 billion was invested in offshore hedge funds.

According to statistics, if "funds of funds" are not included, offshore funds manage almost twice as much assets as onshore funds.

General mutual funds cannot be established offshore.

Therefore, general funds can also hedge, but there are many restrictions.

In China, there are no public funds that cannot buy or sell futures foreign exchange, so there are no financial products that can be short-sold, so hedging operations cannot be done.