Some hedge funds employ similar methodologies to managed accounts.
For example, if a hedge fund specializes in trading forex or foreign currencies utilizing a counter-trend, short term methodology, it might perform similarly than or be highly correlated to an FX managed account with the same strategy.
So how are hedge funds and their managed cousins different then? In notable ways. Here are two: transparency and manager access to customer funds.
Transparency: Fund vs Managed
Managed accounts are more transparent than their fund counterparts. Under a managed structure, the investor has direct access to his account. This is provided by the brokerage firm the investor opens the account with, which allows the investor to see the positions and transactions in his account or the profit and loss from each transaction.
The hedge fund, on the other hand, performs its own internal accounting via an external company called a fund "administrator." The administrator provides investors their account statements either on a monthly or quarterly basis, depending on how frequently the fund's net profit or loss is calculated and the fees assessed.
Portfolio Manager Access to Funds
In a managed account program, investors open their own accounts with a regulated brokerage firm, so the manager does not receive deposits/withdrawals directly from customers. He only has limited authority to make trading decisions (buy/sell) in the customers' accounts. This structure provides a higher level of safety of funds for customers relative to hedge funds, which can receive customer monies directly. Some hedge funds have led to investor losses due to fraud, like the multi-billion dollar Ponzi scheme orchestrated by the ex-Chairman of the NASDAQ (National Association of Securities Dealers Automated Quotations system), Bernie Madoff, brought to light in late 2008.
Despite this major difference, more and more hedge funds are using well known fund administrators as a "second signer" in customer accounts. This means that the fund manager needs to get a "sign off" from the administrator before making a withdrawal or transfer from the fund's account. This gives investors the peace of mind that the fund manager won't run off with their money.