Mega-mergers should provide opportunities for Risk Arbitrage strategies

With managerial confidence in good shape, the effervescence of redemptions is likely to continue.

With risky assets returning to highs, investors are questioning the next catalyst to lift stocks even higher. However, knowing that the Fed could announce a reduction in its asset purchases at the FOMC meeting on June 16, it seems wise, from a tactical point of view, to eliminate some of the risk exposure. wallets. However, alternatives are scarce. Bonds risk being held back by rising inflation expectations and the return on cash is zero or even negative.

CTA and event-driven strategies

It is in this context that, for several months, interest has been in certain hedge fund strategies. Among them, CTA and Event-Driven managers benefit from the best prospects.

The sectors most affected are still cyclical activities, such as information technology, consumer affairs, finance and industry.

The CTA strategy portfolios are currently long on equities and commodities, while their exposure to bonds is almost zero or even negative. This approach seems attractive, especially since this asset mix provides a certain diversification compared to traditional asset classes.

Event-Driven strategies, for their part, are benefiting from more corporate actions than ever before, and the situation is likely to continue. Global M&A volumes exceeded $ 300 billion for the fourth consecutive month in May, peaking at more than $ 350 billion.

Return of mega-mergers in the United States

At the same time, mega-mergers are making a comeback in the United States. More than 50% of the volumes were from transactions over $ 5 billion in May, for the third month in a row. The sectors most affected are still cyclical activities, such as information technology, consumer affairs, finance and industry. In defensive sectors, M&A activity also remains strong in Europe and the United States within the healthcare sector. Among media companies, the latest big announcements were of Discovery’s $ 43 billion buyouts of WarnerMedia and Amazon’s $ 8.45 billion takeovers of MGM. In Europe, the takeover of Deutsche Wohnen by Vonovia for 30 billion euros, in real estate, also provides a foretaste of the impact that mega-mergers could have on the trading activity of the Old Continent. .

READ  Support package for jobs and economy continued in third quarter | News release

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.