How do public funds and private funds differ?

A public fund raises money from investors through public offerings or public sales and is subject to strict investor protection rules, including investment rules such as diversification requirements, the obligation to explain and deliver a prospectus, and external audits.

A private fund raises money from a small number of investors by private placement, and these rules are waived or relaxed for it. The greater freedom in management also means investors bear more responsibility for judging the risks themselves.