Hedge funds and private equity funds - spot the difference

matthew lynn

What's the difference between a hedge fund and a private-equity fund? Easy. One speculates in bonds, stocks, currencies and commodities, using leverage and derivatives, while the other uses its own capital and borrowed money to buy companies, improve them and then sell them on.

Well, not so fast. The evidence suggests that hedge funds and private-equity funds - the two hottest growth sectors of the financial universe for the past five years - are converging.

What seems to be emerging is a new