This is the second article in a two-part series covering a recent program on alternative mutual funds.  Speakers at the program – including K&L Gates partners and Cordium executives – discussed the benefits and limitations of alternative mutual funds, outlined ways to enter the alternative mutual fund market and provided a thorough overview of some of the investment and operational restrictions imposed on alternative mutual funds by the Investment Company Act of 1940.  This article summarizes the investment and operational restrictions identified by the speakers, including issues relating to leverage, custody, prime brokerage, valuation, liquidity, portfolio management, CFTC jurisdiction and compliance policies and procedures.  The first article in this series addressed the potential advantages of alternative mutual funds over hedge funds, mutual fund laws and rules that are typically foreign to hedge fund managers, hedge fund strategies that “fit” within the mutual fund model and the pros and cons of three structures for entry by hedge fund managers into the alternative mutual fund business.  See “K&L Gates and Cordium Detail the Structuring, Investment and Operational Mechanics of Entry by Hedge Fund Managers Into the Alternative Mutual Fund Business (Part One of Two),” Hedge Fund Law Report, Vol. 7, No. 24 (Jun. 19, 2014).