In a letter from Michael Gray, head of the fund formation and investment management practice at Neal Gerber Eisenberg, LLP., I received some expert commentary on the subject of how hedge funds and other alternative investors are stepping in to fill the financing gap on everything from private equity deals to real estate.

With banks sitting on the sidelines, Gray points out that hedge funds have stepped in to provide last resort financing for a variety of transactions.  This is evidenced, Gray says, from the recent popularity of distressed securities and increased vulture investor activity.

Big names affected

Given the scope of the credit crisis, Gray underscores that no one is immune, not even well-known companies who may be seeking financing and having a hard time finding it.

Liquidity at a cost

Gray feels hedge funds are providing a legitimate contribution to the business landscape, because they offer financing when no one else will.  However, the terms that they negotiate are much more aggressive than with traditional financial institutions.

Big opportunities for investors in distressed assets

Gray feels that distressed assets are going to be a huge area of activity for hedge funds until traditional sources of financing come back. That could be 1-2 years or more.

With experience advising hedge funds on their formation and compliance needs, Gray focuses on transactions involving venture capital, private equity, hedge funds, fund formations, real estate and intellectual property.