Prop Trading vs Hedge Fund: Whose Capital Is at Risk

September 21, 2026

6 minutes

Last Updated: November 4, 2026

Prop trading vs hedge fund comes down to whose money is at risk. A proprietary trading firm trades its own capital and keeps the profit; a hedge fund invests outside investors' money for management and performance fees, historically around 2% and 20%. On EVEDEX Funded Trading, the capital is your own margin, from 50 USDT, and you keep 100% of the profit.

This guide compares the structures side by side, including retail prop firms built on paid evaluations and the own-margin model of a perpetual futures prop firm, follows one profitable month through each and explains who pays for a loss.

Key takeaways

EVEDEX, a multi asset trading platform, runs Funded Trading on the trader's own margin: 100% of the profit, and up to the full margin at risk.
Prop trading firms risk their own capital; hedge funds risk their investors' capital.
Hedge fund managers are paid through management and performance fees, historically around 2% and 20%.
Retail prop firms sell evaluations and pay a profit split, often 80 to 90%, usually on simulated accounts.
Who bears a loss is the clearest way to tell the models apart.

Prop trading vs hedge fund: key differences

Structure	Whose capital	Who bears the loss	How people are paid	Drawbacks
EVEDEX Funded Trading	The trader's own margin; the notional is a leverage ceiling, not money lent	The trader, up to the margin posted	The trader keeps 100% of profit	The margin can be lost in full; web app only
Proprietary trading firm	The firm's own capital	The firm	Traders: salary plus bonus or a share of results	Selective hiring; the firm sets strict risk limits
Retail prop firm	Usually simulated capital after a paid evaluation	The trader loses the fee; rules cap the firm's exposure	Profit split, often 80 to 90%	Fees, strict loss limits and payout rules
Hedge fund	Pooled capital of outside investors, often plus the manager's own	The investors, in proportion to their stake	The manager earns management and performance fees	High minimums, lock-ups, fees even in weak years

Trading interface comparison across account types

Is a prop firm a hedge fund?

No. A hedge fund raises money from investors, usually accredited or professional ones, and must answer to them under a fund structure. A proprietary trading firm has no outside investors: it trades its own balance sheet and hires traders to do it.

Retail prop firms borrow the "funded" language but work differently again: the trader pays for an evaluation, then trades an account that is usually simulated. So how do prop firms make money? From those fees and a share of the profit, not from management and performance fees.

Prop trader vs hedge fund trader: pay and career

Both are paid mostly through results. Do prop firm traders get a salary? At institutional firms, often a small base one, with a bonus that follows their own profit and loss; at retail firms there is no salary at all. At a hedge fund, analysts and portfolio managers usually earn a salary plus a bonus that depends on the fund's performance and the fees it collects.

Hedge funds tend to hire from finance and research backgrounds. Prop firms judge traders mainly by results under strict risk limits, which is why a prop trading strategy starts from the loss limit rather than from the signal.

One profitable month, three ways

Take $1,000 of trading profit:

EVEDEX Funded Trading. There is no split: the trader keeps the $1,000 minus trading fees and funding, because the capital behind the position was the trader's own margin.
Retail prop firm, 90/10 split. The trader keeps $900 and the firm $100; the evaluation fee paid earlier is not refunded if a later month loses.
Hedge fund. No individual trader receives the $1,000 directly. With a performance fee of 20%, $200 goes to the manager, a management fee is charged on assets regardless of the month, and the rest belongs to the investors.

Who pays for a loss

EVEDEX Funded Trading: the loss comes out of the trader's margin, up to the full amount posted.
Prop trading firm: the firm absorbs the loss and may cut a trader's limits or let them go.
Retail prop firm: breaking a loss limit usually closes the account; the trader loses the fee.
Hedge fund: the investors' capital falls, and so do the manager's fees.

Where EVEDEX Funded Trading fits

EVEDEX Funded Trading is closest to a personal leveraged account: an own-margin model without an evaluation, a fee or a profit split.

Whose capital: your own margin; the notional is a leverage ceiling, not money EVEDEX lends you.
Margin tiers: six tiers, from 50 USDT of margin for a 1,500 USDT notional to 3,335 USDT for 100,000 USDT.
Profit and loss: you keep 100% of the profit; the maximum loss is the margin you posted.
Markets: the same 52 perpetual markets as a regular account, according to EVEDEX data as of November 4, 2026, including 39 crypto perpetuals, gold, oil, US stocks and forex.
Fees: no more than 0.015% maker and 0.045% taker before up to 35% cashback; funding is calculated every 8 hours and charged hourly.
KYC: no classic KYC; every deposit passes an automated AML check.
Access: web app only, without API access; not available in restricted countries.

Perpetual contracts carry a high risk of loss.

FAQ

A prop trading firm trades its own capital and keeps the profit; a hedge fund invests outside investors' money and earns management and performance fees, historically around 2% and 20%. Retail prop firms are different again: they sell paid evaluations, usually run simulated accounts and pay traders a share of the profit.

No. A hedge fund manages money for outside investors under a fund structure and answers to them. A proprietary trading firm trades its own capital, and retail prop firms mostly sell evaluations on simulated accounts. Neither type of prop firm raises money from investors, which is the core difference from a fund.

There is no fixed answer: both are paid largely through bonuses or profit shares tied to results. Hedge fund pay depends on the fund's fees and performance, prop pay on the trader's own results, and retail funded traders earn only a profit split, with no salary and nothing in a losing month.

Usually not. Hedge funds generally accept only accredited or professional investors, ask for high minimum investments and may lock up capital for a period. A prop firm takes no outside investors at all, so the comparison is about who supplies the capital and who bears the loss, not about where to invest.

The term is used loosely, usually for a prop firm that gives traders access to a funded account. It is not an investment fund: there are no outside investors, and the trader's own money at risk is the evaluation fee or, in own-margin programmes, the margin the trader posts.

Hedge fund managers earn a management fee on the assets they run and a performance fee on profit, historically around 2% and 20%. The management fee is charged whatever the result, so investors pay it even in weak years, while the rest of the profit and any loss belong to the investors.

At a proprietary trading firm, the firm absorbs the loss and may cut a trader's limits. At a hedge fund, the investors' capital falls. At a retail prop firm, breaking a loss limit closes the account and the trader loses the evaluation fee. On an own-margin account, the loss comes from the trader's margin.

Your own. You post margin, from 50 USDT for a 1,500 USDT notional up to 3,335 USDT for 100,000 USDT, and the notional is a leverage ceiling, not money EVEDEX lends. You keep 100% of the profit, and the maximum loss is the margin you posted, which can be lost in full.