Event-Driven Still Seen A Winner

Date: Monday, October 15, 2007
Author: Hedge Fund Daily

Event-driven strategies will continue to benefit from the current market turmoil through the first quarter, according to half the respondents of Reuters quarterly survey of fund of hedge fund managers, making it the top choice for the second consecutive survey. A sharp decline in mergers and acquisition activity, however, has resulted in a shift of emphasis from takeovers to restructuring, thus giving new life to special situations, fixed income and global macro strategies. Kris Carlo Raecke of Union Bancaire Privee said in a Reuters interview, “Volatility could well pick up going into next year and global macro managers are best equipped to deal with that. The next few months should also be a profitable for distressed-debt funds,” says Raecke, noting that while default rates have not climbed, “there are a lot of securities trading at distressed prices even though the company is not distressed.” The Reuters survey indicates that renewed interest in distressed debt and credit strategies has come at the expense of merger arbitrage. Meanwhile, hedge funds have the feds to thank for their rejuvenation in September, as they benefited from broad market growth prompted by a half-point percentage cut in interest, and are likely to see a second boost should the Federal Reserve come through with another anticipated reduction.