WEST PALM BEACH, FL (www.hedgeco.net) – Private equity firms have always signaled their unhappiness with hedge funds encroaching on their turf, but can they withstand the might of hedge funds thathave significant amounts of money in their coffers to do deals fast. Private equity firms are also not happy about hedge funds� lending practices. Some private equity firms, banks and other WallStreet firms have charged that hedge funds have invaded their money-lending arena in a bid to achieve absolute returns for their investors. In addition, traditional lenders charge that hedge fundshave often adapted their own rules in lending money to clients, by amending loan agreements.
Lately, growing numbers of private equity firms have also started venturing into the hedge fund business but analysts, think private equity firms may lose out on such competition. According to James Sprrayregen a bankruptcy lawyer, “Hedge funds do what others are not willing to do.� He explained, �That hedge funds are willing to take more risk for more return, and are agnostic about outcomes as long as they are protected.”
The competition between private equity firms and hedge funds has become a major issue these days. While several private equity managers such as Blackstone Group, Bain Capital, Texas Pacific Group and others have opened their own hedge fund operations, analysts believe such competition will likely intensify in the coming years as more hedge funds will likely participate in the private equity deals.
The private equity method of doing business is comparatively slower than those employed by hedge fund managers. Private equity managers would typically buy a controlling stake in companies and may sell them three to five years down the road. On the other hand hedge funds are quick to act, they often concentrate on their trading strategies moving in and out of the market and locking in profits when they occur.
John O’Neill, a partner at law firm Ernst & Young said, �That when hedge funds compete on deals with private equity firms, while those roles are positive for the private equity firms, hedge funds have an edge because they take talents away from private equity managers. But some believe both sectors can cooperate for mutual benefits. Paul Levy, founder of New York based JLL Partners said, “The same way private equity firms have teamed up on larger deals, there is no reason why private equity and hedge fund people can’t do the same thing. It’s just a question of acknowledging each other’s skills.�
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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