Question

All of the following statements would be true with regard to Hedge Funds EXCEPT: (A) They take long and short positions and use derivatives. (B) All sophisticated investors are allowed to invest in Hedge Funds. (C) They generally offer investors the ability to sell monthly, quarterly, or annually. (D) They are not registered under the Investment Company Act of 1940.

Answer 1

The correct answer is (B).

Step-by-step explanation:

Hedge funds are investment funds that pool funds from different investors and, through a series of complicated and often risky investments, offer high returns to investors. Because of their risky and less regulated nature, hedge funds are usually only available to very selected investors, called sophisticated investors. Sophisticated investors are those who are considered to have enough capital and market experience to engage in certain investment opportunities unavailable to other investors. However, hedge funds establish their own rules of operation, and not all sophisticated investors are allowed to invest in them.