What is advisory discretionary fund?

What is the difference between a Hedge Fund and a High Yield Investment Program aka. HYIP? (Not only from an American perspective)

• Disclaimer:  I forgot to add my usual disclaimers: tagged the question as 'International Economics', I am not an American, though I  got used to everything defaults to American settings on whichever various otherwise internationally oriented discussions if you do not explicitly states you are not an American. I got used to it, no worries. See Doug Mewhirter's (otherwise surely great - I have no problem with that -, from an American perspective) answer. Thanks, Doug, BTW! So in Europe you are much more free to invest however you wish, yeah I heard in the US you can't even invest in such a basic product as an international mutual fund. === To continue on my other question () this separate question came into my mind. [Edit: I explicitly say - so to be clear for my guest answerers - that the above means I am not particularly interested in any over-regulation of advanced countries (like the US or Switzerland) on the matter, let's consider a 'free' (as in free to conduct your finances) country like Malta, Albania, Lebanon, etc.] Namely, from you can accept minimum accounts to your fund in the range of 100,000, 10,000, 1,000, or even 100, depending on your business strategy. Then comes the question, how do you differentiate between a hedge fund and a HYIP? You can usually join a HYIP with relatively lower amounts than usual with hedge funds, with usually quite lax jurisdictions and structures. Edit: Doug Mewhirter states in his answer that HYIP = Ponzi. I don't think that is that simple, I can imagine it is completely possible for a program to use hedge fund strategies, be based in a lax jurisdiction, accept a low amount from investors (and be called a HYIP for doing so). Edit 2: this seems to be have been answered as a section in Anyone feel free to edit this to be more coherent.

• Answer:

  Hedge funds are investment partnerships that are only available to people who meet minimum income and net worth requirements. They are not as regulated as mutual funds, but do have a certain amount of oversight. The partnership agreement is a binding contract, and the limited partners can demand audits and/or sue for fraud if the contract is breached. (This is US law). HYIPs are ILLEGAL "investment funds" that have ZERO oversight or regulation. They are Ponzi Schemes, which pay interest to existing investors from new investors' funds. They always collapse under their own weight when the HYIP cannot attract enough new investors to maintain payments to original investments. The operators of the HYIPs then take the remaining money and disappear. The promised rates of return for HYIPs are laughably high - 10% to 20% per MONTH. If a hedge fund makes 20% per YEAR, then it has done well. Do NOT invest in HYIPs. Your money will disappear.