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What is a central characteristic of markets associated with hedge funds?
Structured for regulatory oversight.
Feature low-price institutional options.
Primarily target high-net-worth individuals.
Sold without prospectus to accredited investors only.
The correct answer is: Sold without prospectus to accredited investors only.
A central characteristic of markets associated with hedge funds is that they are primarily sold without a prospectus to accredited investors only. This is because hedge funds are often designed to engage in more complex and less regulated investment strategies compared to traditional investment vehicles. By targeting accredited investors—who are defined as individuals or entities that meet certain financial criteria—hedge funds can operate with fewer regulatory restrictions. This allows them greater flexibility in their investment approaches, which can include derivatives, leverage, and short selling. The process of not requiring a prospectus for these investments is primarily aimed at ensuring that only those who have the financial expertise or means to absorb risk are participating in these markets. This creates an environment tailored to sophisticated investors who can actively manage and comprehend the risks involved with hedge fund strategies.