At least we’re not falling back on Irrational Exhuberance.
The ebb and flow in the capital market cycle, which can infect almost anyone with fever when things get rolling as they are now, or deep depression when they are in a free fall or moribund.
The alternatives - holding the investments at historical book value or having them appraised in the traditional manner - may offer familiar comfort, but they are not suitable for this purpose.
All of these asset classes share the distinction of being large, growing and hard-to-value, and - in light of the three key industry drivers - compel Hedgebay and Numeria to align.
On top of an unprecedented amount of capital sloshing around the globe, not just in the U.S. and Western Europe, the big change this time is the role of hedge funds.
This crowd of seasoned pros, who’d all lived through several economic cycles, feel a slowdown coming on like a cold, damp rain.
Even though Side Pockets reconcile several of the differences between hedge funds and private equity, such that the former can more easily invest in the latter, the question of valuation is still bouncing around like a just-fumbled football.
These are but two of the many reasons cynics will cite when they say hedge funds are playing with dynamite and don’t know it. That is to say, pricing discipline and thorough due diligence are the hard lessons learned in the 30-year history of the private equity market.
One can understand the cynics who say these are two worlds that should never, ever converge. Indeed, it could be a collision with bodies strewn everywhere. But opposites do attract, and it’s equally easy to see how their distinguishing features make them perfect complements.