Event Driven Investing - Sector in Brief
Event Driven strategies provide diversification through exposure to company-specific – as opposed to market – risk. Yet today’s climate raises questions about opportunities and sub-strategies. What are the key implementation considerations for investors?
IN THIS PAPER
What’s new? It is often assumed that bull markets offer the best environment for Event Driven strategies due to strong M&A Volume, but potential periods of market decline provide different opportunities within this diverse sector.
Understanding strategies: An overview of event driven strategies by phase of economic cycle and implementation in the capital structure, including Merger Arbitrage, Activism, Distressed Opportunities, Special Situations and Niche Arbitrage.
Implementation and manager selection: Investors have a broad, diverse manager landscape to consider. Risk/return profiles range from conservative to aggressive, while different strategies provide varying exposure to market beta.
With diversification from equities high on investors’ agendas in mid 2019, Event Driven strategies are in focus due to their emphasis on idiosyncratic risk. Yet, while the risk/return profile may hold appeal, there are questions surrounding the opportunity set. M&A activity remains strong. Yet clouds on the horizon such as US/China trade tensions, political tensions and increased regulatory scrutiny of mergers could increase the risk of ‘deal breaks.’ A potential decline in M&A Volume should be countered by a rise in opportunities for Distressed or Special Situations strategies. We hope this brief research note proves helpful to investors considering the space.
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This commentary is for institutional investors classified as Professional Clients as per FCA handbook rules COBS 3.5R. It does not constitute investment research, a financial promotion or a recommendation of any instrument, strategy or provider. The accuracy of information obtained from third parties has not been independently verified. Opinions not guarantees: the findings and opinions expressed herein are the intellectual property of bfinance and are subject to change; they are not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets discussed. The value of investments can go down as well as up.
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