Hedge funds and private equity: Features, diversity, and regulations

Alternative investors have become much more prominent in the global financial ecosystem. Four of the most prominent categories include private equity (PE), hedge funds, sovereign wealth funds, and venture capital. Activist hedge funds are particularly focused on short-term returns; more controversial is whether such short term is damaging to the long-term good of corporates or not. As with private equity, they are most commonly limited partnerships, with relatively high investment criteria, and with a specified lock-up time frame. The chapter reviews key strands of the literature on both hedge funds and PE funds, and draw out the implications for theory. It discusses the relative research interest in hedge funds and PE funds by reference to data from Google Scholar. The chapter explains differences in hedge funds and PE funds in respect of performance, activism, and diversification. It offers some insights into regulation of both hedge funds and PE funds, and to the development of theory.