Private equity firms and hedge funds are finally learning to live together, despite how wary the former is over how the latter is encroaching on its turf, an Aug. 5 report from Reuters indicates.

Coziness between the two financial giants is often considered a negative for private equity firms, which stand to lose deals to hedge funds seeking acquisitions as their returns come under pressure.

Nonetheless, buyout firms are edging into the hedge fund territory. The Blackstone Group, Bain Capital and Texas Pacific are among those that have built hedge fund businesses.

John O'Neill, a partner at the law firm Ernst and Young said that while there will be plenty of instances where the two compete on deals, the overall role that hedge funds play for private equity firms is positive.

Hedge funds bring lots of financial backing to buyouts and sometimes the exertion they put on company boards can open the way a "white knight" to swoop in on a deal. Hedge funds are also less credit-sensitive than buyout firms, the Reuters report said.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.