Seems like only yesterday that hedge funds were hot on Asia – maybe too hot. In fact, HFs are beginning to feel the heat of competition for the same few deals, and as that once wide open door is swinging closed, a new window of opportunity has opened. Reuters reports that hedge funds, especially those operating in China and India, have become an important source of capital for companies before initial public offerings, assuming a role more typical of banks, which are risk-averse. It’s a win-win situation for some, as companies get the money and hedge funds get in on the ground floor of a potentially hot name. In the process, hedge funds not only are taking on a bank-like role, but, in a way, they are also operating like private equity firms. “Hedge funds have seen the way private equity firms have been able to make very big returns by investing prior to an IPO,” one investment bank managing director told Reuters. The difference is that p.e firms are looking for a long-term stake, while hedge funds arrange loan-like deals. “It’s fairly early stage now,” said ABN Amro‘s Steven Panizza in a Reuters interview, “but I think you’re going to find it increasing.”
