Talk of private equity/hedge fund tie-ins. Thanks to p.e. as the driving force in merger and acquisition activity these days, hedge funds are likely to reap the benefits as well in 2007. Reuters reports M&A arbitrage funds are red hot right now and the sizzle is not likely to fizzle any time soon. “Overall, a continued stream of corporate activity is going to provide plenty of opportunities,” James Murray of HSBC’s head of institutional sales and business development said in an interview with Reuters. Joining the chorus of positive prognosticators is Sid Shamanth of Titanium Capital who says, “Any funds playing M&A should continue to do better than the average (hedge fund), because there are enough catalysts around.” These funds have a two-prong game plan: targeting merger targets before a deal is announced and going after companies experiencing shift in prices after a takeover, with the former yielding a bigger profit than the latter. M&A arbitrage funds are typically tucked into the event-driven category, which is one of the industry’s best performers so far this year, returning 9.16%, behind leader convertible arbitrage—the dog of recent years—which is up 10.68% so far this year, according to the Credit Suisse/Tremont Hedge Fund Index. Also looking good for 2007, according to Reuters, is global macro and long/short equity funds.
