What is event driven hedge fund strategy?

Event-driven investing or Event-driven trading 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.

Which is an example of an event driven strategy?

Example of an Event Driven Strategy A skilled analyst team at an institutional investor will judge whether or not the acquisition is likely to occur, based on a host of factors, such as price, regulatory environment, and fit between the services (or products) offered by both companies.

What kind of strategies do hedge funds use?

Because of this, hedge funds employ various strategies to try to generate active returns for their investors. Hedge fund strategies range from long/short equity to market neutral. Merger arbitrage is a kind of event-driven strategy, which can also involve distressed companies.

Is Merger Arbitrage event-driven?

Understanding Merger Arbitrage Merger arbitrage, also known as risk arbitrage, is a subset of event-driven investing or trading, which involves exploiting market inefficiencies before or after a merger or acquisition.

What is a macro strategy?

A global macro strategy is a hedge fund or mutual fund strategy that bases its holdings primarily on the overall economic and political views of various countries or their macroeconomic principles. Holdings may include long and short positions in various equity, fixed income, currency, commodities, and futures markets.

What is a macro hedge fund strategy?

How do hedge funds develop strategies?

Some hedge funds take advantage of the mispricing of securities up and down the capital structure of one single company. For example, if they believe the debt is overvalued, then they short the debt and go long the equity, thus creating a hedge and betting on the eventual spread correction between the securities.

What is SPAC arbitrage?

SPAC arbitrage may be viewed as an option to potentially benefit from a successful merger of the SPAC with a company. The option is not only free, but a return is generated when you buy the SPAC below its trust value.

What is volatility arbitrage strategy?

Volatility arbitrage is a trading strategy that attempts to profit from the difference between the forecasted future price-volatility of an asset, like a stock, and the implied volatility of options based on that asset.

What is the difference between micro and macro perspective?

With a macro perspective, you take a long-term view of your company’s strategies. With a micro perspective, you focus on all the details in how you are implementing your existing strategies.

What is convertible arbitrage strategy?

A convertible bond arbitrage strategy is one that benefits from the difference in pricing between a convertible bond and the underlying stock price. The arbitrage strategy takes a long position in the convertible bonds while shorting the stock of the company.

Which hedge fund strategy has the highest return?

Outside of equities, the highest-returning hedge fund strategies in 2020 were event-driven funds, which gained 9.3 percent for the year, according to HFR. Macro hedge funds returned 5.22 percent for the year, while HFR’s relative value index ended 2020 up 3.28 percent.

What is NAV SPACs?

Before a deal, capital is held by the SPAC in trust in “safe” securities (i.e., U.S. Treasuries) so that shares of the SPAC typically have an anchor as it relates to their net asset value (NAV), which is typically $10 per share.

How do investors make money in a SPAC?

How SPACs Work. SPACs raise capital to make an acquisition through an initial public offering. A typical SPAC IPO structure consists of a Class A common stock share combined with a warrant. A warrant gives the holder the right to buy more stock at a fixed price at a later date.