Mr Mallard says: “The environment is clearly extremely supportive for the strategy as a whole with a flurry of corporate activity, while volatility is increasing, which is a good thing for those who know how to use options.” He adds that while cash-heavy balance sheets and the return of CEO confidence will bolster corporate activity for a few years, it will be only in certain industries. “Some industries are almost consolidated with just four to five players and as such, there is only a small window of opportunity. We see that in such industries as beer, cigarettes, cable, French telecom services and specialty chemicals.”
He believes that private equity-type deals should continue to perform well: “This means identifying potential leveraged buy-out targets and obtaining the same required changes as their private equity counterparts.”
Some believe that higher interest rates may not stall M&A activity. Amit Shabi, a partner at event-driven hedge fund house Bernheim Dreyfus, says that while it may be easier to finance debt to undertake M&A activity in a climate of lower rates, often higher interest rates will generate more confidence because they reflect a more buoyant economy.
As a result, there is nothing to suggest that the current vogue for event-driven funds is likely to subside. Nevertheless, investors should exercise some caution if interest rates or geopolitical problems start to exert an influence on markets.
Cherry Reynard is a freelance journalist
Risk arbitrage: key figures
$1.8trn
Worldwide M&A deal value in the first half of 2014, up 73 per cent on a year earlier
39%
The amount (totalling $689.1bn) of overall M&A volume in the first half of 2014 that came from cross-border M&A
$337.8bn
Deals announced in Asia Pacific in the first six months of 2014 – the region’s strongest first half of dealmaking since 1980
Source: Fidelity Worldwide Investment
