Event-driven style hedge funds typically focus on distressed securities or risk arbitrage.
The distressed securities style focuses on debt and equity of companies experiencing or expecting to experience financial difficulty. It includes reorganization, bankruptcy and distressed sales. Securities often trade at deep discounts due to regulatory restrictions on some investors, lack of research, low liquidity and excessive investor fear. Investors accept credit and liquidity risk in hope of long-term turnaround. Sometimes managers hedge with options, sometimes take active roles in restructuring the company.
The merger arbitrage style shorts the acquirer and goes long the acquiree to capture the spread.
Event-driven multi-strategy funds draw on multiple themes including merger/risk arbitrage, distressed securities and other themes such as Reg D private transactionsFor more information, see all articles on: Uncategorized See also: