Friday, June 22, saw the stock market debut of The Blackstone Group, the biggest and splashiest of the private equity funds that have pretty much dominated the financial scene for the past several years. Investors poured $4 billion into the firm, buying stock that would give them no voting rights in the hope of getting a piece of the profit-spinning energy that Blackstone and its colleagues have created in recent years.

They should be so lucky.

Over the years, hedge funds have gotten a lot more press than their private equity (PE) counterparts, but Blackstone's initial public offering (IPO) has changed that. There are considerable similarities between hedge funds and PE. Both consist of pools of capital contributed by institutional investors, like pension funds and university endowments, as well as some very rich individuals, and are run by a relatively small group of very highly paid money managers. But their investment styles are generally rather different. Hedge funds move in and out of positions often with lightning speed. PE operates on a longer time scale. Their typical modus operandi is to buy up whole companies (public companies, whose shares trade on the open markets), take them private, slim them down and sell them--either to other companies, or to float their stock on the markets afresh, after having worked their magic on them.

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