May 10, 2006
‘Hedge funds not as risky as private equity’
Well, if you ever needed confirmation, here it is. ABN Amro recently admitted that lending to hedge funds was not as risky as exposure to leveraged buyouts by private equity funds, which like corporate borrowing a few years ago poses a bigger risk to investment banks. Reuters.com reports:
Hedge funds mostly trade listed stocks, fixed income securities, currencies and commodities. Private equity firms buy companies they think are cheap and pay for the transaction by loading the firm's balance sheet up with debt, using leveraged loans and high-yield bonds, which can become a problem when interest rates rise and growth slows.
Read more: Hedge funds less risky for banks than private equity
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