A fund registered under the 1940 Act faces daily valuation, limits on leverage and illiquid holdings, independent board oversight, and strict custody. Mutual funds and most etf products live inside this regime, which is why their disclosures and fee structures look similar.
The exemptions matter just as much. Sections 3(c)(1) and 3(c)(7) allow private funds to avoid registration if investors are limited in number and are accredited-investor or qualified-purchaser level. That is the legal basis of the hedge fund industry.
Derivatives use by registered funds is governed by a risk-based rule with a value-at-risk limit and a derivatives risk manager, which is why leveraged and inverse ETFs must be structured carefully rather than simply borrowing.
Related: accredited-investor, qualified-purchaser, etf, commodity-pool-operator, sec