To qualify for the exemption under Regulation D, hedge funds may only be offered to which type of investors?

To qualify for the exemption under Regulation D, hedge funds primarily target accredited investors, as these are individuals or entities that meet specific income or net worth thresholds. Regulation D establishes certain criteria that allow private placements to be conducted without the need for full registration with the SEC, primarily aimed at protecting less sophisticated investors from high-risk investments.

The correct response highlights that hedge funds can indeed be offered to accredited investors, which include high-net-worth individuals and institutions that satisfy the financial criteria. Additionally, Regulation D permits hedge funds to include a limited number of non-accredited investors, provided that the fund meets specific conditions associated with the exemption. This approach balances the need for investment opportunities while ensuring some level of investor sophistication and capacity to absorb potential losses.

Other categories mentioned in the options, such as non-accredited investors alone, institutional investors only, or only high-net-worth individuals, do not provide the full picture of the regulatory framework under which hedge funds operate. Understanding the definition of accredited and non-accredited investors is crucial since the exemption under Regulation D greatly impacts how hedge funds can raise capital while navigating regulatory requirements.