Final answer:
A hedge fund is a private investment pool open only to wealthy or institutional investors that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds.
Step-by-step explanation:
An hedge fund is a private investment pool open only to wealthy or institutional investors that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds. Unlike mutual funds, which are regulated by the SEC and have restrictions on their investment strategies, hedge funds have more flexibility in choosing investments and can pursue riskier and more aggressive investment strategies. This allows hedge funds to potentially generate higher returns, but also exposes them to higher risks.