In the world of investment, one could easily mistake an activist investor and a hedge fund, and with good reason. Here is the difference between the two.
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| Image source: betanews.com |
An activist investor may be an individual or a group that buys a significant amount of shares from a company to become a stakeholder. The activism comes in when the investor gains influence in the company and uses that influence to initiate change.
The activist investor can influence change by amending the company’s corporate governance policies. By doing so, they can then follow their agenda, may it be changes in executive compensation plans, improvements in supply chain management, or push efforts toward sustainability. The changes, of course, will benefit everyone in the company.
A hedge fund is a lightly regulated private investment fund that may use unconventional methods to create huge return margins in any market. One of the strategies commonly used by hedge funds is the use of tax shelters.
Hedge funds are typically structured as limited partnerships and limited investment to the business. Although they are seen as shady in the investment community, checks and balances have been placed by the Securities and Exchange Commission. These regulations make it possible for anyone to take a look at the hedge fund’s activities.
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| Image source: pierfine.com |
Jon McKee Queen is currently working with Amatex Capital, a private equity firm that pursues special situations and arbitrage opportunities in Ukraine. Jon specializes in project development, company management, corporate finance transactions and fundraisings, commodity trading, and risk quantification. For more information on activist investing, follow this Twitter page.
