Spotlight on Hedge Funds

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Outside of a chance to score big or lose their shirts as individual investors, why should CFOs care about hedge funds?

Finance chiefs have been circumspect as members of Congress, the Securities and Exchange Commission, institutional investors, and hedge-fund advisers have weighed in on the current surge among the lightly regulated pools of capital. If finance executives are quiet because they're in deep thought, that's good, since the funds can affect their jobs in significant ways.

Maybe the most direct impact is the effect that onslaughts by activist funds can have on companies, forcing a CFO to consider a buyback, the assumption of more debt, or some other shakeup in capital structure. Gaining awareness of possible incursions of fund advisers into boardrooms should thus be on every finance executive's to-do list.

Then there are the possible effects that the blossoming of hedge funds can have on the cost of capital. If the highly leveraged funds head south, that could mean a squeeze at the banks. On the other hand, the funds can represent new sources of corporate leverage.

For those reasons, and a few others, has been looking into what the increased presence of hedge funds might mean for corporate finance. The results can be found in this report.

How to Beat Hedge-Fund Bullies
Hedge funds often push company management around. But they may not be as tough as they seem.
How to Beat Hedge-Fund Bullies, Part II
CFOs should sniff out the intentions of activist hedge funds that are substantial shareholders in their companies, experts say.
A Short History of Hedge Funds
From Aristotle to Amaranth, the funds have lured investors with dreams of heady profits and terrified them with nightmares of risk.
Hedge-Fund Scrabble
Finance executives who want to find out what the darned things are might have to shuffle the tiles a little.
How to Talk to a Hedge Fund
Even shortsighted short sellers are too powerful to ignore.

Hedge-Fund Manager Eyes Bisys Board Seat
Last November, Bisys agreed to pay $25.1 million to settle a Securities and Exchange Commission investigation into previous restatements.
CFO Departs, Hedge Fund Protests
After Ceridian swaps in another finance chief, Pershing Square Capital Management criticizes the management changes as ''a real disappointment.''
Lawmakers: Hedge-Fund Risk Hits Pensions
Big worries are seen in "the commingling of sophisticated and unsophisticated capital."
Sen. Grassley Seeks Hedge-Fund Rule
The amendment would narrow the exemption used by big hedge funds "to avoid registering with the Securities and Exchange Commission," says the ranking Republican on the Finance Committee.
Treasury: Banks Should Rule Hedge Funds
Rather than trying to add to their own power, regulators are focusing on boosting banks' ability to discipline the funds.
SEC Probing Private Equity, Hedge Funds
The commission is reportedly investigation possible insider trading in takeovers spawned by private partnerships.
Hedge Fund Chair Says SEC Dropping Probe
The SEC reportedly will not bring enforcement actions against Pequot Capital. In June, a former SEC investigator testified before Congress that the SEC had halted his investigation of Pequot Capital for political reasons.
Hedge Funds Accused of Shorting Scheme
Fairfax Financial says it was the target of "a massive and fraudulent disinformation campaign" that included negative analyst reports and personal slurs about the company's chairman.
Cox: SEC Lacks Hedge Fund Power
While recommending regulatory moves to make funds more accountable to investors, the chairman seems wary of asking for help from Congress.
Court Overturns SEC Hedge Fund Rule
A federal judge sends the SEC back to the drawing board, saying its hedge fund registration rule is "arbitrary" and based on fuzzy definitions.
Hedge Funds Bid for Three Companies
ValueAct Capital and Acxiom; Jana Partners and Houston Exploration; Steel Partners and Bairnco.
BofA Hedges Spur Five-year Restatement
A company review unearths mistakes in derivatives accounting and spawns a switch to mark-to-market reporting.
Fed: Hedge Funds Get Too Much Credit
In a sign of growing concern, the president of the New York Federal Reserve calls on banks to tighten up their lending to hedge funds.
BofA Restates Due to Hedge Accounting
Bank is tripped up while taking the ''shortcut'' method for derivatives used as hedges under FAS 133.
CIT to Restate Due to Hedge Accounting
The lender has terminated its compound derivatives and replaced them each with a pair of stand-alone swaps.
Hedge Fund Bankruptcy Role Seen Probed
The SEC is reportedly looking into whether fund representatives overstated their bond positions to gain membership on creditors' committees of distressed companies.
Hedge Fund Pressures McDonald's
Investors urge McDonald's to spin off restaurants, but the fast-food giant refuses.
PIPE Probe Eyes Another Hedge Fund
Several other funds have been under the lens this year.
Hedge Fund Activism Gains Momentum
Hedge fund investors flex their governance muscle by forcing change at companies they control.

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