Hedge Funds

Prior to 1950 if you wanted to start a new business and needed money you had to rely on friends to back you. Banks would not take the risk so you were left to your own devises. In the early 50’s three guys pooled their cash and went looking for people with new ideas. When they found someone who looked promising they would offer to back them for a share of the profits. They had some successes and some failure but because they knew what they were doing they made money. It wasn’t long before other groups started their own investment funds and these people became known as venture capitalist. Today there are thousands of groups like this and they have brought on many businesses that might otherwise never have started. Some of the better known are Digital Equipment, Apple and Genentech. As time passed other investors looked for different ways to help business and one type is called, (Hedge Funds) and these have recently come under attack since that is how Romney made his money. Hedge funds find companies that are not growing or going broke and invest in them in the hope of growing them. Sometimes this means downsizing and reorganizing and sometimes the company still goes under. Since hedge funds are composed of private money there are not regulated and are private. This is the appeal to wealthy investors. Hedge funds have saved many companies. Then there are, “Private-Equity Funds” and these too are wealthy people who invest in companies to grow them and then sell them for profit. They differ from hedge funds in that they have business experts that they send into the companies they buy. My daughter-in-law, Varuni worked for a private equity fund here in Minneapolis. They bought a company out east and she was sent there to reorganize. She closed one plant, opened a new one and sent some production to plants in Europe and some to China. This project lasted about one year and she was done. The company that had been losing money started making a profit. I feel that anyone who criticizes this kind of activity does not understand the free market economy.