In summary
Event driven hedge funds focus on exploiting pricing inefficiencies caused by corporate events such as mergers, acquisitions, restructurings, bankruptcies, or other significant corporate actions. The strategy identifies mispriced securities with favourable risk/reward characteristics based upon differentiated views of value-unlocking catalysts, event probabilities and post-event valuations. The success of such strategies is dependent upon the manager’s ability to predict the outcomes of these corporate events accurately and manage the associated risks effectively.
In this article we explore event driven investing, offering insights into the most common event driven strategies. For each strategy, we provide a description, sample trades, and review how each has historically performed in different market environments, considering the unique risk and return profiles associated with these strategies.
