A leading private equity manager has criticised hedge funds for their growing involvement in private...
A leading private equity manager has criticised hedge funds for their growing involvement in private equity-type deals and questioned their patience for longer duration investments.
Thomas Kubr, chief executive at private equity, buyout and mezzanine firm Capital Dynamics, said private equity funds' longer-term turnaround investments required a "very different mentality and skill-set" to the typical trading approach for hedge funds. He also cast doubt on whether hedge funds were the best choice for potential investee firms involved in restoring companies' health or buying out divisions.
"Private equity usually involves a step-by-step change in a company," Kubr said. "For example, a change in strategy, geographic expansion, new product introduction, turn-around, transition of family to professional management - these things are not done overnight. It takes years to expand into a new market or get new products.
"A hedge fund manager may wish to do a turnaround in two months but I do not believe savvy hedge fund investors do not know about these things."
"Private equity is long-term, whereas hedge funds are more trading operations, and that shows in the people, in how their mentalities work."
Kubr said that he would rather work with experts and added that there existed a "fundamental question mark about how serious an appetite hedge funds must have to do this kind of thing."
He notes mezzanine deals is one area for which hedge funds may be more appropriate.
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