Hedge Fund vs Private Equity

Sample Comparison Essay on Hedge Fund vs Private Equity

Hedge Fund vs Private Equity

Are there distinct differences between hedge fund and private equity? Regardless of the case, it is worth noting that the two are unregulated and in recent cases, there have been cases where the groups are getting into the other’s domain. Generally, private equity puts a lot of value concentration on a few companies. At around 2006/2007, there were several club deals, where firms were collaborating to raise enough money for a given deal to go through.  In such cases, these firms work closely once they become the owners of the portfolio organizations. This is necessary because they work towards increasing the value of the company through improved management and efficiency.

While the companies earn overtime dividends, they make real money during Initial Public Offers (IPOs) and when they sell a company. On the other hand, hedge fund offers a wider spectrum of short-term investments. Here, a host of strategies are used to achieve the desired results. They may include long or short term, macro and credit among others. Another important attribute of hedge funds is that trading time can range between milliseconds and years. Most of these funds remain in liquid securities to allow them to trade at any point and lock in their income.

One of the main differences, which stand tall between hedge fund and private equity, is liquidity. On a general scale, hedge funds are invested within the market and in cash. For this reason, they are marked to the market on a daily basis because they are liquid. It is important to note that hedge fund investors are allowed to get back their money after a period of one-year lock-up. This can take place within forty-five days after you write a notice. To the contrary, private equities have longer lock-up period of five years or more.

Another distinct difference is based of the types of investments, which they make coupled with their holding period. It is essential to underscore the fact that hedge funds mostly invest in tradable securities, which may include derivatives, bonds, foreign exchange, futures, stocks, swaps, and commodities. Additionally, these companies may hold the investments for a short period, which may be even minute. On the other hand, private equities have a tendency of buying long-term assets, which may include private companies and real estate. This happens because investors in this kind of funds understand that they are locking the assets in question for a much longer time compared to their hedge fund counterparts. Moreover, private equities have capital calls, which require investors to make additional capital towards the fund. Nonetheless, hedge and private equities usually have structures that can accommodate such events.

Besides the fact that hedge fund and private equity exhibit a host of differences, they also have some elements in common, which constitute to their similarities. Firstly, they are alternative investments, which have a higher risk degree as compared to retail investment. In addition, they are marketed to institutional and certified investors. Another similarity is that they invest from capital, which is contributed by limited partners and their compensation towards the management is based on profits realized and the assets that are under management, upon which a fee is charged. They also give managers a wider spectrum that allows them to realize the goals of investors.

We are a leading essay writing company, with presence in all the continents of the world. We are number one because we value our clients. At www.assignmentwritinghelp.net, we deliver customized and high quality papers at all times. We are reliable because we beat even the shortest deadline. Come to now and boost your performance today.

Retrieved from: http://thehedge.com/2013/04/are-hedge-funds-and-private-equity-funds-the-same/




Posted by:


Related articles

list of articles



  • Sample Essay on SWOT Analysis of The Home Depot January 20, 2016
    SWOT Analysis of The Home Depot SWOT analysis of The Home Depot is among the best tools used by the home improvement retailer to gauge its ability to stay afloat and profitable in the market. Although it is considered the largest home improvement retail chain in the world with an estimated revenue base on more […]


Latest News From Blog

Check out Our Blog's assignment samples and tips on how to Write Assigments
Essay sample on the Effects of Cold War on Soviet Union..

Effects of Cold War on Soviet Union The Soviet Union was one of the main participants in the Cold War. It was engaged in the war with the USA and - See more

Essay sample on Effects of Cold War on Asia

Effects of Cold War on Asia Tensions of the Cold War began shifting from Europe to Asia in 1949 when Mao Zeodong proclaimed the birth of the ...Read More

Sample Essay on United Kingdom Healthcare System

United Kingdom Healthcare System United Kingdom healthcare system, also known as the National Health Service was established...Read More

Back to Top