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Private Equity or Hedge Fund

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With all the hubbub surrounding hedge fund advisor registration, there’s another trend in the hedge fund marketplace that’s heating up, according to Jim Hedges of LJH Global Investments. The continued convergence of hedge funds and private equity is accelerating, he says. “Hedge funds are dumping more private equity into their portfolios every day and private equity managers are trying to figure out how to get into the hedge fund business,” he says. “This has been going on for about a year and a half and it’s accelerating at a pretty aggressive pace.”

Hedges says hedge fund managers are increasingly seeking out returns and are thus “going to more illiquid securities and investing in private equity because they have the opportunity to do so when they talk to companies that they are going to invest in.” Private equity managers, he says, “are great research engines that have tremendous operational and industry expertise but they don’t have any way to monetize it in the public securities market,” he says. Private equity managers are also “concerned about distribution management. When you take a company public you want to be in a position to [know] what type of trading strategy should be implemented and who the other market participants are.”