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October 23, 2005

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Ryan Dahl

But are hedge funds really long-term buyers in the same way that private equity is a long term buyer? The highly speculative nature of hedge fund managers (short-term focused) seem to make them more akin to the risk-arbitrageurs rather than the KKRs of the world. Indeed, the jury is still out as to whether Eddie Lampert has made the transition from trader to investor. Of course, the "wolf pack" nature of hedge funds does impose a discipline on management, but the different investment horizon of the hedge fund as opposed to, say, the private equity fund seems to imply different implications for management behavior. On the other hand, active hedge fund participation in a particular issue could "set the stage" as it were, for a more meaningful change of control event (or at least the threat thereof). Yet, can management adequately serve an investor base that is as fundamentally different as, say, SAC and CALPERS? No man can serve two masters . . . .

anony

The effect of overleverage on the ability of the company to conduct business and the collapse of the Junk Bond market had a great deal to do with cesation of takeovers.

Rather than "shareholder value" why not say
"raise the stock price". Then you cover those folks who got the price up with not real value underneath.


Larry Ribstein

Those interested in more business and movie background on "Wall Street" might be interested in my article, "Imagining Wall Street," http://papers.ssrn.com/sol3/papers.cfm?abstract_id=771724.

Jake Kaldenbaugh

Check out this article regarding the perils that hedge funds may face if they're actually successful in gaining control of their targets:

http://nakedshorts.typepad.com/nakedshorts/2005/10/bkf_activists_t.html

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