Which of the following is NOT a characteristic of hedge funds?

The correct answer highlights that hedge funds are not subject to strict regulations similar to mutual funds. Hedge funds typically operate with a greater level of flexibility and fewer regulatory constraints compared to mutual funds. This allows them to engage in a wider range of investment strategies, including short selling, trading derivatives, and using leverage.

In contrast, mutual funds are heavily regulated under securities laws, which impose various requirements to protect investors, including regular reporting and limits on the types of investments they can hold. The looser regulations for hedge funds enable them to pursue more aggressive investment strategies, which can lead to higher potential returns but also greater risk.

The other characteristics mentioned are indeed true of hedge funds. They are primarily targeted at high-net-worth individuals due to the investment minimums and risk profiles involved. Additionally, many hedge funds are established in jurisdictions that have favorable tax treaties to enhance returns for their investors. The aspect of minimum lock-in periods is also a common feature, as many hedge funds require investors to commit their capital for a set duration before they can withdraw it, allowing the fund manager to make longer-term investments without the pressure of having to accommodate frequent withdrawals.