Hedge Funds Poised to Profit as Banks Shun Risk

Private equity eyes trading territory ceded by changes at Goldman, Morgan Stanley
By Clay Dillow,  Newser Staff
Posted Sep 23, 2008 1:05 PM CDT
Chairman and CEO of the Blackstone Group Stephen Schwarzman. Blackstone is one of a handful of large hedge funds acting more like an investment bank these days.   (AP Photo)
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(Newser) – With the last two large US investment banks going commercial in an effort to stay afloat, private-equity and hedge funds are stepping into the void, the Wall Street Journal reports. Taking on roles previously filled by the likes of Goldman Sachs and Morgan Stanley, hedge funds like Citadel and private-equity groups like Blackstone are "stepping further into the risk-taking fold," the Journal notes, and are positioned to profit handsomely.

Such funds enjoy several advantages on suddenly risk-allergic Wall Street: a steady supply of capital, easier credit, and top investing talent. As smaller funds are crushed by the credit crisis, opportunity knocks louder for firms like Blackstone, whose chief recently acknowledged that “our businesses were set up to benefit from market turmoil and scarce capital.”