Hedge Funds & Investment Banks
Hedge Funds | The New Investment Banks
Are hedge funds the new investment banks? I think so. They will not take over all investment banking activities or all traditional banking activities but they are taking away market share from the investment banks within many arenas including private lending. I've seen a large increase of inquiries coming to me through my site from commercial real estate, patent portfolio, land development and private corporations seeking capital from hedge funds because they can no longer access it through their regular bank sources. Here is an article excerpt on this topic:
An unprecedented cash crunch is choking the ability of banks to lend and creating an opportunity for hedge funds to launch, or ramp up corporate lending facilities, Reuters reports.
Companies that have relied on bank borrowing to grow, or even maintain their business, are turning to hedge funds in a move that some say may signal a broad shift of lending from banks to asset managers.
“I have a very strong belief that the new investment banks will be the absolute return hedge funds and the managers of private equity,” Thomas C. Priore, chief executive of ICP Capital, an hedge fund that manages $13 billion in fixed income assets, in New York, told Reuters.
“They’re not going to become banks, they’re going to provide the functionality and interface with people looking for capital, like the investment banks used to, but with an asset management balance sheet approach,” he added.
ICP began lending directly to companies earlier this year, focusing on making loans that are secured against cash flows. Most recently, the company arranged a $121 million financing package for the purchase of two ships that will be leased to a unit of Mexican state-owned oil company Petroleos Mexicanos, or Pemex.
“The capital constraints on banks are opening up opportunities for new entrants, like our firm, who can take leveraged credit assets and loans from bank balance sheets,” Mr. Priore told Reuters. “Banks, and other companies, will not be afforded the leverage they once were,” he added. Source