Hedge funds that are acting like anything but – namely, as they take on the appearance of buyout funds with activist acquisitions in order to influence a company – could be asking for trouble. Last month, the Boston Business Journal carried an article about an internal e-mail left on a commuter train by a Chubb Corp. insurance executive. In it, the executive, Wendy Dowd, wrote, "We are not interested in this new breed of alternative investment that has the structure of a hedge fund, yet acts like a buyout fund. Regulators are taking notice, and they aren't the only source of potential claims. Hostile tactics used can lead to a variety of wronged parties."

Activist hedge funds, it seems, just may find themselves slapped silly with lawsuits, as they lock up their cash in a buyout – and then can't allow cashouts, as traditional hedge funds typically do. Faced with unhappy investors, HFs could pay an unexpected price for not performing. According to hedge fund expert and attorney John McCarrick, of law firm Edwards Angell Palmer & Dodge, in a BBJ interview, "Chubb's concern... is that the more 'hands on' the hedge funds are in their investments, the more likely it is that the hedge funds will be involved in regulatory investigations and civil suits if their investment vehicles don't perform as expected." A little less activism may go a long way.