Shadow Banking Success: Study finds hedge funds make pretty good lenders
| Jun 23rd, 2010 | Filed under: Academic Research, Hedge Fund Industry Trends, Today's Post | By: Alpha Male |
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A few years ago, we ran a story about a couple of studies of the secret sauce used by activist hedge funds. These studies found that hedge funds weren’t that great at managing businesses (compared to private equity firms), but that they were superb at picking eventual winners and hounding existing management until they liberated the value locked up in the firm. The studies looked at debt and equity positions taken up by activist hedge funds.
An academic paper released in April of this year aims to explain the role of hedge funds a little higher in the capital structure as “primary lenders”. In essence, the paper by Vikas Agarwal of Georgia State University and Costanza Meneghetti of West Virginia University examines what many policymaker have called the “shadow banking system.” According to Agarwal and Meneghetti, their’s is the first study to look at hedge funds’ activities in the primary loan market.
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