The once cozy relationship between hedge funds and mutual funds is showing deep strains. Mutual funds got into trouble for letting hedge funds improperly trade their shares in so-called market-timing and late-trading gambits. Now concerns are mounting in Washington over a fast-growing phenomenon in the fund world: portfolio managers who simultaneously manage a hedge fund and a mutual fund -- and may be tempted to favor the former over the latter in everything from trades to IPO allocations because of the hedge fund’s munificent compensation for outstanding...
