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July 04, 2006
Hedge Funds Foray Into New Territories
Hedge funds are banking on their vast resources and immense wealth to bring them profits as they venture into the banking and finance sectors. Infrastructure financing, private equity, real estate, insurance, trading freight, and agriculture are just a few of the sectors that hedge funds have diversified into. Cerberus Capital Management and Canyon Capital Advisors are two funds that have taken to offering banking services such as loans that do not involve as much bureaucracy as bank loans. Funds that follow multiple strategies and invest in markets that have the potential to generate high returns are the most sought after by investors these days. Reuters reports:
"Some of the large multistrategy funds are definitely being more active in the insurance market," said Magnus Olsson, head of hedge funds at London & Capital. "It's fair to say some hedge funds are turning into small banks, more active in the financing area, providing finance to small and even mid-cap companies in the PIPE space." PIPE, or private investment in public equity, is a means by which public companies get financing quickly by issuing unregistered stock at a discount to the market price.
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