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The Value of Hedge Funds

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The Value of Hedge Funds

Berlau letter in the New York Times

Re “The Great Seduction” (column, June 10):

While David Brooks
makes some good points about debt and thrift, he paints with a broad
brush an unwarranted negative picture of recent financial innovation.

Mr.
Brooks states that “Bill Gates built a socially useful product to make
his fortune,” but then writes, “But what message do the compensation
packages that hedge fund managers get send across the country?”

But
hedge fund managers perform many “socially useful” functions for
shareholders, consumers and the economy. They play a vital role in
channeling capital to its most efficient uses.

Managers like
Carl C. Icahn, William A. Ackman, and Phillip Goldstein have held many
a chief executive’s feet to the fire, forcing these executives to
create value for all shareholders.

Turnarounds at companies
from the McDonald’s Corporation to Marvel Entertainment have been
instigated by the activism of hedge funds.

Today, hedge funds are
also playing roles similar to venture capital in the 1980s in providing
seed capital to the Microsofts of tomorrow.

It’s also worth
noting that hedge funds were some of the first to blow the whistle on
subprime securities, short selling them for the benefit of their
investors.