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Technology and event driven(ED) strategies have been partially disrupted by the trade war. Most such strategies are now complicated by trade disputes. The trade war and clashes between US, Europe, Mexico and China, will have negative impact on event driven (ED) funds. Trade disputes increased risks of globally interdependent strategies.
For instance - As US President Donald Trump tweeted about the AT&T – TimeWarner – politics in deal made it difficult for the investors to identify situations or formulate a strategy. Similarly, the Qualcomm – NXP deal was called off in July as the Chinese regulators failed to approve the deal. At least 10 top investors reduced exposures in NXP due to these factors.
In June, hedge funds recorded losses and this was one of the worst years of the decade as the positive results were very low. The worst performers in the time were Asia Pacific hedge funds, emerging markets and equity-based funds, that had negative returns and some of the trends hit European markets and developed markets as well.
US Dollar, Brazilian Real, Euro and Yen underperformed but macro strategies increased during this time. North America hedge funds performed positively.
The investment in event driven and relative value strategies increased in 2018 first half, where capital invested in event driven was about $10 billion to $845 billion(in Q2). The total profits in 2018 - H1 in event driven strategies was up to $3.3 billion and the funds attracted inflow of $4.4 billion.
The hedge fund - Eureka hedge index was up 2.50 per cent in the year and Asian ED fund index was up to 8.26 per cent per annum, while, the assets of Asian hedge funds declined in the phase.
Advantages and opportunities
Bonds have been giving low yields in Q1-Q2 2018, as the interest rates are increasing and housing has a number of risks. Multi strategy and multi asset outlook is believed to be the most useful strategy, although, there is no guarantee provided by the fund managers. Event driven funds target opportunities in mergers and market inefficiencies such as in pricing, bankruptcy, spinoff etc. Any kind of corporate activities raises opportunities for event driven funds.
Fund managers focusing on China, Korea and India recorded losses in June, whereas, North American hedge fund managers reported growth 2.78 per cent despite trade issues and volatility. The main reasons for the growth in US markets were - tech equities which outperformed all the other categories and were able to provide growth up to 17.09 per cent.
There are many high fee funds and investors pay up to $59 for every $10,000 investment in funds. The fee was $100 in 2003. Some investors are seeking opportunities with lower fees and some of the funds offer zero minimum balance account and zero fees. Many mutual funds offer discounts and have lowered fees to attract customers. New marketing strategies are adopted to attract investors with smaller amounts to invest in such funds.
To find out more about Event- Driven Funds / Market Neutral Funds, click 99 Alternatives at (http://www.99alternatives.com).
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