Hedge funds offer qualified investors a unique partnership. While hedge funds first began as a way to offer investors a balanced – or market-neutral – approach to investing, the methods have evolved through the years. This presentation focuses on one of those strategies, event driven.
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Introduction
Hedge funds offer qualified investors a unique partnership, with the ability to invest
alongside them.
While hedge funds first began as a way to offer investors a balanced - or market-neutral
– approach to investing, the methods for delivering returns have evolved through the
years.
This presentation provides a brief overview of some of the strategies used by hedge
funds in the marketplace today.
Topics:
• Investment Strategies
• Event Driven
• New Hedge Fund Partnerships
• Resources
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Hedge funds offer investors a broad range of investment options. No two
hedge funds are identical, but funds can be categorized broadly by the
type of strategies they employ.
While the individual investment decisions made by each fund vary, hedge
funds are united by the same fundamental goals:
• Portfolio Diversification- Prevents over-concentration in specific assets.
• Risk Management – Helps anticipate and avoid volatility in the marketplace
• Reliable Returns Over Time – Provides opportunities for asset growth
Investment Strategies
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Event Driven
Investment managers maintain positions in companies currently or
prospectively involved in corporate transactions including mergers,
restructurings, financial distress, tender offers, shareholder buybacks, debt
exchanges, security issuance or other capital structure adjustments.
Managers pursue strategies based on fundamental characteristics (as
opposed to quantitative) and specific future developments.
Position exposure includes a combination of sensitivities to equity markets,
credit markets and company-specific developments.
According to the 2014 Preqin Report on Hedge Funds, event driven funds
account for a relatively small portion of the total existing active funds;
However, they represent a larger proportion of the total capital managed by
the industry – 12 percent of industry assets under management.
Source:2014 Preqin Global Hedge Fund Report
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Institutional Investors Seeking Out New Hedge
Fund Partnerships
According to Preqin’s 2014 Global Hedge Fund
Report, investors expect to increase hedge fund
allocations to their existing portfolios over the next
12 months.*
Beyond multi-manager funds, public pension funds
are the most active type of institutional investor
seeking new hedge funds, with the proportion of the
total number of fund mandates issued by this group
rising throughout the year. This is in line with recent
growth trends, which indicate that in 2007, around
196 public pension funds invested in hedge funds -
today that number is around 377.
The accompanying chart outlines how investors are
expected to allocate – by strategy – over the next 12
months.**
Source: 2014 Preqin Global Hedge Fund Report
**Data for 2015 will be updated as soon as published.
6. 4 Resources:
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For more information on hedge fund strategies, visit:
1. Managed Funds Association or www.managedfunds.org
2. Hedge Funds 101
3. Hedge Fund Strategies: An Overview of the Various
Investment Strategies Offered by Hedge Funds in the
Marketplace Today
4. Hedge Fund Research Strategy Definitions
