Your portfolio is performing well but you wish to minimize your market volatility exposure. An event driven hedge fund is the way to go. But, you look for a passive approach, you wonder …
What are the best event driven hedge funds?
Well, read on fellow compounder …
What are the Best Event Driven Hedge Funds?
The best event driven hedge funds are Lyor / Tiedemann Arbitrage, Alpine Merger Arbitrage, Elliott Investment Management, Third Point, Farallon Capital, and Pershing Square Capital because of their successful track records, event driven hedge strategies, and management expertise.
These funds are organized into three categories: dedicated merger arbitrage, activist, and broad event driven focus. In other words, you need to know what you’re looking for. Let’s take a look::
Best Dedicated Merger Arbitrage Funds
Lyxor / Tiedemann Arbitrage Fund – Lyxor maximizes shareholder value by investing in complex corporate actions offering wide price spreads. Their investment focus is mergers but can include tender offers, spin-offs, proxy contests, liquidations, and leveraged buyouts (LBO).
Alpine Merger Arbitrage Fund – Merger arbitrage is the fund’s focus, but participation also includes recapitalizations, partial tender offers, spin-offs, restructurings, bidding wars, hostile bids, and majority shareholder buyouts. This investment vehicle is one of many strong answers to, what are the best event driven hedge funds?
Best Activist Hedge Funds
Elliott Investment Management, LP. – Renowned for its event driven hedge strategies, Elliott’s accretive activities are merger arbitrage, distressed security hedging, and activist investing.
Third Point, LLC. – This hedge-centric fund employs an event driven activist investment strategy and seeks to identify corporate events saturated with hidden value.
Best Broad- Focus Event Driven Hedge Funds
What are the best event driven hedge funds?
We think Farallon Capital management and Pershing Square Capital are outstanding.
Pershing Square Capital – Founded and managed by the high-profile Bill Ackman, the fund engages in merger arbitrage, spin-offs, hedge investing and is known for their substantial short positions. Pershing Square’s investment strategy is multi-faceted:
- Event Driven Strategy – The fund primarily uses an event-driven strategy which capitalizes on companies poised to undergo capital structure changes resulting from an event-driven corporate action.
- Value Investing – Pershing Square prospects for and invests in companies trading under their intrinsic value, seeking to profit from the price discrepancy.
- Activist Investing – Ackman, through Pershing Square, is well known for his activist investor pursuits in large corporations deemed to be mismanaged. The fund takes large equity positions and then advocates for board representation, mergers, liquidation, and improved capital allocation.
- Portfolio Concentration and Long-Term Horizon – The fund is a concentrated portfolio meaning it invests in a smaller group of opportunities. Short-term investments are short positions, substantial in size, with most long positions held on a long-term horizon.
- Risk Management – Hedge strategies are employed as a risk management tool to mitigate the fund’s losses. Derivatives, options, and short positions offset Pershing Square’s downside risk.
Pershing Square’s historical performance is decorated with outstanding successes in unlocking shareholder value. A few successful investments are Herbalife, Starbucks, Canadian Pacific Railway, The Hughes Corporation, and Chipotle. The fund has had its lesser share of unprofitable forays such as Valeant Pharmaceuticals.
Farallon Capital Management – Farallon Capital must be included in the answer. This global institutional asset manager invests in merger arbitrage, distressed debt and equities, and holding company arbitrage.
What is the Best Performing Event Driven Hedge Fund Ever?
The subjective answer to what is the best performing event driven hedge fund ever is Elliott Investment Management, LP. The “subjective” preface is due to a definitive answer that must consider differing investment-specific performance metrics, varying holding periods, and the availability of proprietary hedge fund data.
Elliott Investment Management is a well-known and very large event driven hedge fund with, as of December 2023, $65.5 billion in assets under management (AUM).
The fund’s extensive track record is decorated with successful fortes in merger and acquisitions, corporate restructuring, liquidations, non-distressed debt investing, real estate securities investing, and commodity trading.
Widely respected for its capital growth longevity, Elliott continues to successfully invest in event driven arbitrage and hedge special situations for the betterment of their shareholders.
Event driven hedge funds seek and capitalize on specific event driven corporate actions, such as arbitrage, activism, and broader special situations occurrences. They generate profits from the value change in the equity and debt of the event-affected company.
What are the best event driven hedge funds? Our list above is representative and yet incomprehensive. The answer, along with the list, will change with different selection criteria. Though each fund has its own unique expertise, the potent common denominator is simultaneous capital appreciation and preservation.
Read Next:
- What are the Largest Special Situations Funds?
- What is the Largest Special Situations Fund?
- Event Driven Investment Strategy: How Does It Work?
