Reuters – Some large multistrategy hedge funds are beginning to look more like mini banks as they stray from their usual haunts in stock and bond markets to new areas which include financing andinsurance.
Motives include the hunt for higher returns after years of weak performance, which have persuaded some hedge funds to explore new areas like infrastructure financing and private equity, where many have been active for several years now.
Their forays into traditional banking areas have been aided by large banks, many of which recently have shown little or no interest in small or sometimes even medium-sized companies.
Banks have preferred to focus on blue-chip companies, where they see the greatest rewards and left a niche which today is being exploited by hedge funds.
“Private loans would be the most common or typical situation. Loans to small companies which do not have access to larger banks,” said Nicolas Campiche, who heads a group that selects hedge funds for Pictet et Cie clients.
