Can a mutual fund invest in a hedge fund?
I understand that this sounds like a stupid question but hypothetically speaking would this be possible?
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Yes, this is just another form of a fund-of-funds and it does happen, albeit not super common. There are currently regulations in place that limit the extent to which a retail investor can access these products though - I'm not an expert, but I believe if a fund invests over 15% of its assets in illiquid securities (including private funds) it has to be limited to accredited investors. It can be helpful if you're a lower-end accredited investor (say, someone who only wants to put $250k to work but wants access to the kind of funds that require $10M minimum).
Expanding retail access to alternatives is a huge push in the asset management industry right now - lots of people working to limit regulations, expand eligibility (see the recent change of the accredited investor definition), build active ETFs that mimic hedge fund strategies, etc. Tons of money is flowing out of traditional vehicles (think long-only factor exposure-type funds) and into these types of strategies
That’s really helpful, thank you very much
would the same apply to mutual funds investing in PE?
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