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, CFO.com has been looking into what the increased presence of hedge funds might mean for corporate finance. The results can be found in this report.