ABSTRACT

Alternative investors have become much more prominent in the global financial ecosystem. Four of the most prominent categories include private equity (PE), hedge funds, sovereign wealth funds, and venture capital. Although none has escaped controversy, the former two have come under particular scrutiny for their possible effects on target firms. PE explicitly seeks to change how the firm is run in terms of scale and scope of operations, extent of assets, work and employment relations, and/or relative debt leverage; interventions form the basis of returns. While hedge funds may similarly promote new managerial strategies, they may also adopt a more hands-off approach, basing returns on the time period of retention of shares; at the same time, aggressive and short-term buying and selling of shares may impact on the firm’s relative well-being and on managerial behavior.