There was a trio of interesting articles in the Wall Street Journal today on the many entanglements of hedge funds in today’s investment arena.
Ianthe Jeanne Dugan notes that regulators are cracking down on a controversial tactic some hedge funds are using to influence corporate proxy votes. Some hedge funds have acquired shares (and the voting rights) while eliminating the economic risk of holding the shares. As hedge funds become players they have attracted regulatory attention.
“We are in interesting territory now that hedge funds are moving into the mergers-and-acquisitions world,” says Jennifer Spiegel, counsel with Debevoise & Plimpton, who advises hedge-fund and private-equity clients and is uninvolved in the Perry matter. “Now that they are playing more of a role in the investment world, they are subject to the same rules as everybody else. Just because they are fast-moving investment vehicles, hedge funds shouldn’t play by different rules.”
Jesse Eisenger highlights a study that shows that executive compensation as a percentage of corporate net income has roughly doubled over the past ten years. Eisenger believes that:
To me, it’s irrefragable that CEOs are overpaid. Top-executive pay is rising faster than inflation and faster than the average worker’s salary. It’s been rising faster than earnings and faster than stock-market returns. And growth in pay has been accelerating.
Hedge funds activists have become a driving force in the stock market. Eisenger belives they can help solve this problem by targeting underperforming funds with overpaid management.
Katie Martin notes that despite relatively poor performance in 2005, currency-focused hedge funds will continue to attract capital in the new year. Low correlations with other asset classes and a maturation of the marketplace have made currency funds an alternative asset staple.