Investors Seek Multi-Strategy, Event-Driven Funds
Hedge fund investors have expressed a consistent interest in event-driven strategies given the turbulence in the market. Recently, however, investors who were previously looking at merger arbitrage or distressed funds have shifted their attention away from these focused subsets of the event-driven space to more broad-based, multi-strategy event-driven funds.
As the economic landscape continues to change, investors have begun to look for managers that can take advantage of mispricings between securities whose issuers are involved in a variety of corporate events.
A merger arbitrage fund, for example, can take advantage of only merger opportunities. Instead, investors want to move into funds that can adjust their exposure as events happen, whether they are restructurings, mergers, divestitures, or other types of activity. During the past two weeks, BHA data show that more than 20 percent of investors are searching for diversified event-driven funds.
An example of an investor that has taken this approach is a private bank headquartered in Switzerland. When BHA previously spoke with the bank in January, it was seeking European distressed-debt funds with a focus on bank loans. This past week, this investor shifted its focus away from such a granular search in favor of more diversified funds with exposure not only to distressed debt but also special situations, credit, and merger arbitrage. Although the investor still believes European distressed-debt funds present significant opportunities, it expects diversity across all underlying event-driven strategies will give it the same amount of upside while mitigating some of the risk of more niche funds.