Hedge Funds Take a ‘Different Approach' from Private Equity

Expect hedge funds to continue coming into the private equity business, but not to replace it all together, says Paul Finnegan, co-president and managing director of the private equity investment firm Madison Dearborn Partners.

[Hedge funds] have a very different approach, Finnegan told students at the Beecken Petty O'Keefe & Company Private Equity Conference on February 25 at Gleacher Center in Chicago. There are some deals that are perfect for them, whether that’s going in after a Circuit City or a Kmart/Sears. We wouldn’t do those types of deals. We want to be spending a lot of time with management, getting to know managementa much longer diligence cycle. We like to work three, four, five months on a deal before we commit. They're at a different tempo.

Because of these differences, Finnegan disregarded the latest buzz that hedge funds would mean the end of private equity. There’s a recent article by a competitor that says private equity’s going to be the dinosaur and the hedge fund is the place to be, he said. I don’t buy it. There’s room for them and there’s room for us.

The Private Equity Conference was presented by the Entrepreneurship & Venture Capital Group and the Michael P. Polsky Center for Entrepreneurship.

 

Anthony Ruth