Hedge Fund vs. Prop Trading
Here are some major differences between Hedge Fund and Prop Trading:
| Hedge Fund | Prop Trading |
|---|---|
| Hedge funds put their client’s money to invest in the financial markets. | Proprietary traders use the firm’s money to invest in the capital markets. |
| Hedge funds are answerable to their clients. | Proprietary Trading works to strengthen the firm’s balance sheet by investing in the financial market. Hence, no restrictions are followed in terms of risk. |
| They are the target of the Volcker Rule, which aims to limit financial institutions’ risk. | Traders can certainly take more risks since they are not dealing with client funds. |
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