The difference is simple, do you have securities (such as CDO)? As you said, when you insure securities, buying CDS is just a hedge fund. But if you don't buy securities in advance, but buy CDS directly, then you are short. Because you don't have any securities, you don't have any securities income to offset the premium (money given to CDS sellers regularly). Once there is something wrong with the securities, you can ask the seller for the securities of the same value, which will make you profit, provided that all the securities are normal. Then you have to pay the seller for free every issue.

Above, that's it.