WEST PALM BEACH, FL (HEDGECO.NET) – Due to flat markets, many hedge funds now sit on heavy amounts of cash, but many are now diving into the traditional money lending business according to JeffreyPeek, president and chief executive of CIT. These disclosures were made at the Reuter�s Finance Summit. Mr. Peek said, “All their strategies have been overwhelmed with cash and so now they’ve gottenvery much into some of the lending business,” Peek told conference attendees at the Reuters Finance Summit.
Peek also said hedge fund companies have become an attractive source of cash, some hedge funds are offering loans at the rate of 4%-6% according to him, and in return they get a stake in the company in case the company defaults in such loans. Peek also said, �They espouse things like lend to own, ‘Let’s make the loan and if it goes bad, at least we’re an equity owner and we got it at 85 cents to the dollar.� Peek thinks it is really the non-traditional lenders who are making the lending market so difficult.
Hedge funds have helped to increase liquidity in the markets currently, “Right now it’s an issue just because there’s so much liquidity out there and the alternative investment sector is getting so much funding,” Peek explained. He thinks hedge funds may not enter the middle market however, because they do not have the expertise to carry out such deals.
Hedge fund assets last quarter doubled from the levels seen in the previous quarter. Another manager, Larry Schloss, a former global head of private equity at Credit Suisse First Boston said �hedge funds won’t have the ability to get out of their loan holdings as fast as they’re used to in the stock and bond markets.� Schloss added, “They now own illiquid investments and they’re used to buying illiquid paper.�
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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