They really understood that stock prices change according to perceptions changing. Event driven strategies merger risk arbitrage risk arbitrage, or merger arbitrage, managers take a long position in the stock of a company being acquired in a merger, leveraged buyout, or takeover and a. Eventdriven investing under which we include everything from merger arbitrage to distressed is a particularly attractive set of hedge fund strategies for two main reasons. The classifications reflect the evolution of strategic trends in. Eventdriven is one of the oldest and most successful hedge fund strategies.
Mv emerging markets ls equity hedge fund beta index mvlsemtr 21nov2012 1aug2006 mv western europe ls equity hedge fund beta index mvlswetr 21nov2012 1nov2003 mv asia developed ls equity hedge fund beta index mvlsdatr 21nov2012 1nov2004 mv global ls equity hedge fund beta index mvlsgltr 21nov2012 1nov2003 mv global event l. Russell investments eventdriven investment strategies june 2014 frank russell company owns the russell trademarks used in this material. Eventdriven the top performing hedge fund strategy in q1 posted by. Hedge funds strategies market trend strategies event driven strategies arbitrage strategies multi strategy. This hedge fund category has been so successful it. Event driven, equity hedge and energy hedge funds lead. A playground for eventdriven managers ip asia ipe investment. An eventdriven strategy refers to an investment strategy in which an institutional investor attempts to profit from a stock mispricing that may occur during or after a corporate event. The amount, type, and reliance on modelling depends a lot on the fund and the flavor of eventdriven investing youre pursuing. Eventdriven equity hedge fund crowding overshadows. At first glance, this recent environment of high deal volumes appeared to be a. This hedge fund category has been so successful it has dominated the top three spots for.
However this is a natural process of weeding out the poor managers from the best managers. Special situations and merger arbitrage strategies are up 3. Yeartodate, equity eventdriven approaches have been among the best performing strategies. This chapter explores some of the strategies used by eventdriven hedge funds, namely merger arbitrage, trading distressed securities, special situations, and. Of those event driven inflows, special situations attracted the majority of assets usd15. The aim is to derive returns that are unaffected by serial correlation, whether induced by trading in illiquid securities or by the return. Good hedge funds have weak spells, but many biases conspire to make mediocre hedge funds look good.
The strategy is market neutral, seeking to generate pure alpha with minimal market sensitivity. Dec 10, 20 i manage an event driven hedge fund called rangeley capital that uses these strategies. This investment theme favors merger arbitrage and special. Eventdriven investment strategies event driven is a hedge fund investment strategy where investors seek to. The eventdriven universe consists of investment opportunities that arise from. The hfri event driven index finished the year with gains of 12. Type of hedge funds fund of funds managed accounts single manager funds. The one sector in the hedge fund world that has been a dominant winner is the eventdriven ed strategy.
This involves event driven managers seeking to profit from security pricing inefficiencies that can occur when companies are involved in a range of corporate events, which includes takeovers, restructures, mergers, capital raising, share buybacks, spinoffs, asset sales, liquidations, bankruptcy, capital returns and many others. An event driven strategy is a type of investment strategy that attempts to take advantage of temporary stock mispricing that can occur before or after a corporate event. This involves eventdriven managers seeking to profit from security pricing inefficiencies that can occur when companies are involved in a range of corporate events, which includes takeovers, restructures, mergers, capital raising, share buybacks, spinoffs, asset sales, liquidations, bankruptcy, capital returns and many others. Our investment team employs multiple investment strategies such as merger arbitrage, convertible arbitrage, and capital structure arbitrage. Event driven hedge fund strategies linkedin slideshare. Cnbc s gemma acton explains what shaped the hedge fund space during 2016. However, this simple definition excludes some hedge funds and includes some funds that are. Eventdriven strategy and substrategy definitions eventdriven total. Change in status or delay of events may affect the price of securities purchased and result in losses to the fund. A list of event driven hedge funds merger arbitrage limited. Hedge funds are an important subset of the alternative investments space. The first mentioned considers distressed hedge funds as directional, invested mainly in fixed income securities. Eventdriven strategies are equity oriented strategies involving investments, long or short, in the securities of corporations undergoing significant change such as spinoffs, mergers, liquidations, bankruptcies and other corporate events. A friend of mine at a mergerarb fund does minimal modelling as i think of it, for exampletheyre much more focused on regulatory approvals, deal closing probability etc.
Eventdriven hedge fund strategies worked best in 2016. List of distressedeventdriven hedge funds excel format. A statistical perspective on hedge fund manager selection. Yeartodate, equity event driven approaches have been among the best performing strategies. Pdf ride the coattails of activist hedge funds with form d. Apr 21, 2014 eventdriven the top performing hedge fund strategy in q1 posted by. Event driven strategy definitions hedge fund strategies 1. Jul 23, 2010 jose galeano, chief investment officer of swissbased fund firm 3a, has recently bought positions in jana offshore partners and york european opportunity hedge funds, lifting his event driven. Hedgefund revival quickens as eventdriven trades prosper. Event driven investing is a hedge fund investment strategy that seeks to exploit pricing inefficiencies that may occur before or after a corporate event, such as an earnings call, bankruptcy, merger, acquisition, or spinoff. The event driven hedge fund list contains detailed contact information for more than 280 distressed and event driven hedge funds throughout the world including, the us, uk, switzerland, china, japan, and more. Focus on our hedge fund advisory solutions platform. In more recent times market practitioners have expanded this definition to include additional events such as natural disasters and actions initiated by shareholder activists. Some hedge funds choose to focus on eventdriven strategies.
Nov 15, 2015 eventdriven strategies have been the most disappointing performers this year, said robert christian, head of investment research at franklin resources inc. Merger arbitrage can be found in the relative value. Jul 09, 2014 while event driven and activist funds benefited from robust equity markets, hedge fund strategies linked to broader based bets on the global economy, known as global macro, have struggled. Key characteristics distinguishing hedge funds and their strategies from traditional investments include the following. Just as the name implies, this is a hedge fund that invests in other hedge funds. The eventdriven hedge fund list contains detailed contact information for more than 280 distressed and eventdriven hedge funds throughout the world including, the us, uk, switzerland, china, japan, and more. May 26, 2016 event driven hedge fund strategies invest long and short in companies undergoing change through corporate activity. Eventdriven the top performing hedge fund strategy in q1. Includes everything from the top event driven hedge funds to smaller boutique funds. Because of its use of complex techniques, financial regulators typically do not allow hedge funds to be marketed or made available to. How to profit from global eventdriven arbitrage share tweet for exclusive info on hedge funds and the latest news from value investing world at only a few dollars a month check out valuewalk premium right here.
I manage an eventdriven hedge fund called rangeley capital that uses these strategies. Event driven 5 relative value 6 credit funds 7 longshort equity funds 8 quantitative funds 9 multistrategy funds 10 managed futures 11 new hedge fund partnerships 12 hedge funds offer qualified investors a unique partnership where they invest alongside the fund manager. Eventdriven hedge fund strategies oxford scholarship. Eventdriven hedge funds pull ahead financial times. Our aim is to present hedge funds, to understand what managers expect to do and to understand how they make or destroy value over time. An average merger arbitrage hedge fund in the sample was founded in 2000 and delivered netoffees alpha. Evolves to profit from significant corporate events. The gmo eventdriven strategy focuses primarily on merger arbitrage. Eventdriven investing is a hedge fund investment strategy that seeks to exploit pricing inefficiencies that may occur before or after a corporate event, such as an earnings call, bankruptcy, merger, acquisition, or spinoff. Hedge fund activist strategies are a particular form of eventdriven investment, whereby fund managers invest in underperforming companies and. Eventdriven hedge fund strategies invest long and short in companies undergoing change through corporate activity. Event driven equities macro cta commodities portfolio hedges 33 7 170 8 63 71 9 42 51 4 56 60.
Mar 26, 2014 some hedge funds choose to focus on event driven strategies. Firstly, there is a strong economic rationale for why returns exist eventdriven investors generate a premium from being niche market participants exploiting areas of inefficiency that exist. One of the major risks inherent in eventdriven strategies is that managers portfolios can be concentrated. For background im a senior at a nontarget sitting on an offer from a nontop 5 special sitseventdriven fund to join when i graduate. An analysis of hedge fund strategies abstract this phd thesis analyses hedge fund strategies in detail by decomposing hedge fund performance figures. Jul 19, 20 hedge fund activist strategies are a particular form of event driven investment, whereby fund managers invest in underperforming companies and attempt to create a catalyst for the sto ck price. We want this first step to both answer any of your questions and also provide an educational foundation for the event driven fund process.
Performance of eventdriven strategies versus other hedge fund strategies in 2019. An event driven strategy is a type of investment strategy that attempts to take advantage of temporary stock mispricing that can occur before or after a. Event driven, equity hedge and energy hedge funds lead hfri. Hfr hedge fund strategy definitions event driven hedge. A detailed look at an important hedge fund strategy written by a fund manager who invests solely in merger arbitrage, also referred to as risk arbitrage, and other eventdriven strategies, merger arbitrage is the definitive book on how this alternative hedge fund strategy works. The fund may use derivatives to hedge its investments or to seek to enhance returns. Exploring the benefits of equity eventdriven strategies ubs. Schedule a call incorporating an event driven fund into any portfolio is a very discerning process. The prospectus and, if available, the summary prospectus contain this and other information about the fund and are. Investment managers who maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or. Event driven strategies are equity oriented strategies involving investments, long or short, in the securities of corporations undergoing significant change such as spinoffs, mergers, liquidations, bankruptcies and other corporate events. Eventdriven investment strategies eventdriven is a hedge fund investment strategy where investors seek to. After a sustained period of multiple expansion, further equity market gains are likely to be mainly driven by corporate earnings growth.
As with any strategy that is based upon an expectation, an eventdriven hedge fund can post significant losses if the actual outcome is different than that predicted by the funds manager. The hedge fund journal is a monthly magazine focusing on the global hedge fund industry. Eventdriven strategies help boost hedge fund assets to. Eventdriven is one of the oldest and most successful hedge fund. Eventdriven hedge funds dominate inflows and performance. While event driven and activist funds benefited from robust equity markets, hedge fund strategies linked to broader based bets on the global economy, known as global macro, have struggled. An introduction to hedge funds lse research online. Jose galeano, chief investment officer of swissbased fund firm 3a, has recently bought positions in jana offshore partners and york european opportunity hedge funds, lifting his eventdriven. Mitigate risk and increase returns with an alternative hedge fund strategy.
Special sits space has definitely been hit hard this year. At the top of the confidence cycle, cash is abundant, ceos go shopping and merger arbitrageurs thrive. Eventdriven strategies have been the most disappointing performers this year, said robert christian, head of investment research at franklin resources inc. Hfr has constructed an accurate, relevant, robust and contemporaneous strategy classification system for all investment managers present in the hfr database. Fotolia partially reducing market dependency with certain eventdriven strategies. Merger arbitrage wiley online books wiley online library. Investment managers who maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments.
The fund typically attempts to generate profits by capturing price movements generated by specific events. For background im a senior at a nontarget sitting on an offer from a nontop 5 special sits event driven fund to join when i graduate. An introduction to hedge funds sovan mitra abstract this report was originally written as an industry white paper on hedge funds. Eventdriven investing is an investing strategy that seeks to exploit pricing inefficiencies that may occur before or after a corporate event, such as a bankruptcy, merger, acquisition or spinoff. Sep 30, 20 the one sector in the hedge fund world that has been a dominant winner is the event driven ed strategy. Event driven cheynes event driven team invests in eventdriven situations in european equities, including merger arbitrage, share class arbitrage and holding company arbitrage. A hedge fund is an investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolioconstruction and risk management techniques to improve performance, such as short selling, leverage and derivatives. Table 1 reports means and standard deviations of our variables for the period spanning 19942015. At rangeley, we do our own analysis, but you can also invest like a hedge fund in some simple ways. Hedge fund managers are usually motivated to maximise absolute returns under any market condition. Hedge funds now vary widely in investing strategies, size, and other characteristics. Therefore, we follow avramov, kosowski, naik, and teo, 2011 and use smoothing parameters derived by getmansky et al. Event driven hedge funds questions re holding period and.
329 1002 1593 1204 1353 774 54 1376 715 51 1120 435 1096 568 1246 1329 680 1550 1003 632 129 1101 1123 1105 1043 811 363 720 872 1100 838 243 1210 532 994