29 Nw. J. Int'l L. & Bus. 603 (2009)
Coming Together after the Crisis: Global Convergence of Private Equity and Hedge Funds

handle is hein.journals/nwjilb29 and id is 609 raw text is: Coming Together After the Crisis:
Global Convergence of Private Equity
and Hedge Funds
Houman B. Shadab*
INTRODUCTION
Two of the most significant types of alternative investment funds
worldwide are hedge funds and private equity funds. A hedge fund
typically engages in short-term trading of financial instruments and
compensates its manager on an annual or quarterly basis. A private equity
fund typically takes long-term management positions in companies and
compensates the fund manager once every several years upon the sale of the
fund's assets. Although primarily centered in the United States and Europe,
numerous markets worldwide are home to each type of fund. Prior to the
subprime mortgage-initiated financial crisis, there was a trend within the
alternative investment sector toward the convergence of strategies and
structures of certain private equity and hedge funds. This article suggests
that although the financial crisis will slow the process of convergence, the
trend toward convergence will ultimately continue and strengthen, albeit in
some ways along a different trajectory than before and with some important
variations across national boundaries.
I. PRIVATE EQUITY AND HEDGE FUNDS AROUND THE GLOBE
A. The Global Private Equity Fund Industry
Four types of private investment funds fall under the private equity
moniker. Venture capital funds finance new companies and then take on an
* Associate Professor of Law, New York Law School. B.A. 1998, University of California at
Berkeley; J.D. 2002, University of Southern California. The author would like to thank for
their helpful comments participants at the Northwestern University School of Law Journal of
International Law and Business Symposium, Globalization of Private Equity: Changes in
the International Market and the Impact on Private Equity Investments, held on April 17,
2009. All errors are the author's own.

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