Hedge Funds- Locusts or Bees

|

|

|

|

|

|

|

|

|

Hedge Funds – Locusts or Bees? |

|

Hedge Funds as Providers of Company Financing |

|

|

|

|

Table of Content

List of Abbreviations i

List of Figures and Tables ii

1. Introduction 1

2. The Concept of Hedge Funds 2

2.1. What are Hedge Funds 2

2.2. The Basic Idea of Hedge Funds 3

2.3. Today’s Varieties of Hedge Funds 4

3. Types and Strategies of Hedge Funds engaged in Company Financing 7

3.1. Relevant Hedge Funds Types 7

3.2. Strategies of engaged Hedge Funds 7

4. Hedge Fund Activism 8

4.1. What is Hedge Funds Activism 8

4.2. How to Measure Hedge Fund Activism 9

4.3. Companies borrowing from Hedge Funds 9

4.5. Impact of Hedge Fund Activism/Engagements 10

5. Hedge Funds in comparison with Private Equity Funds 11

6. Conclusion 12

List of Abbreviations

ROA | Return on Assets |

SME | Small and Medium Enterprises |

| |

| |

| |

| |

| |

| |

List of Figures and Tables

1. Introduction

When Franz Müntefering, a former Head of the German party SPD and vice chancellor of Germany between 2005 and 2007, in 2004 named hedge funds and private equity firms as locusts (“Heuschrecken”), criticism of capitalism regained strengths. Even though hedge funds follow different strategies, what I will elucidate in part 2.3., they were constituted as evil, only looking for their own profit, regardless of social harm.

The debate about hedge funds restarted when it became public that John Paulson, the founder and president of the investment trust Paulson & Co, earned 3,4 billion US$ in 2007 as his bets against subprime mortgages paid out, while the net worth of U.S. households and nonprofit organizations fell from the peak in 2007 to the trough in 2009 by 22% or 15 trillion US$ 15 trillion US$ (Fred Database - U.S. Net Worth of Households and Non-Profit Organizations - Retrieved April 2013). But only a minority performed that well. The...