SEC Reviewing "Hedge Fund Mutual Funds"

The Securities and Exchange Commission (SEC) is reviewing “hedge fund mutual funds” being offered to average investors, evaluating leverage risk in these “uncorrelated” investments.

Mutual funds were designed as a method to enable investors to obtain stock diversification through a small investment, typically a positive risk management strategy.  Investments in hedge funds, normally a preserve for the technically defined “accredited” well-to-do investor, were recently made available through common mutual funds with the notion they could help further diversify investors from potential economic storms.

The problem with these mutual funds is they utilize often opaque strategies with managers sometimes accustomed to transferring their sometimes aggressive trading and revenue generation strategies into a...