Deal Book at NY Times: Hedge Funds Jump Into the Lending Breach

Companies that have relied on bank borrowing to grow, or even maintain their business, are turning to hedge funds in a move that some say may signal a broad shift of lending from banks to asset managers.

“I have a very strong belief that the new investment banks will be the absolute return hedge funds and the managers of private equity,” Thomas C. Priore, chief executive of ICP Capital, an hedge fund that manages $13 billion in fixed income assets.

“Alternative investment vehicles are going to replace banks and investment banks as being the only financing source for a lot of companies, small, medium and large,” he told Reuters. “That field has increased tenfold as traditional investment banks and traditional banks have not been able to lend to these companies at all.”

I also read somewhere about hedge funds shorting Indian equities and lending out the cash thus raised at abnormally high interest rates, given the credit crunch.

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