Fund of hedge fund managers International Asset Management and LGT Capital Partners are seeing an increase in opportunities for event-driven managers.
IAM has a neutral view of returns from these strategies, which it sees as medium risk. It says merger arbitrage deals have provided steady returns for event-driven managers who are able to benefit from corporate events that are less dependent on market conditions.
But it also thinks more deals and wider spreads would benefit returns. A spread is the gap between a company’s current trading price and its value under the terms of the acquisition. A wider spread means a better return for the hedge fund.
LGT is positive on the outlook for mergers and acquisitions as it believes fear and change are driving returns. It says event-dri-ven strategies recently produced positive returns due to asset prices recovery and that M&A activity has stayed strong despite the usual summer slowdown. Deals are also more solid and are being done at reasonable valuations, which LGT feels is good for event-driven managers.
Head of investment management Thomas Weber says: “While we are still in an early stage of a recovery in M&A, the solidity of the deals combined with an optimistic outlook indicates that the M&A area provides attractive investment opportunities.