Event-driven fund (also in German; less frequently

Ereignisgesteuerter Fonds): Hedge funds that seek to profit from specific events in companies and their environment (event driven hedge funds are those that follow a strategy unaffected by the general direction of markets; instead the events that drive these funds are specific to enterprises). Such events include, in addition to the area of operations – such as inventions, market alliances; strikes (including work by the book), substitution competition – also acquisitions, share buybacks or recapitalizations in case of insolvency. – As a rule, a more precise distinction is made according to the particular investment strategy of the hedge fund – risk arbitrage: the management of the hedge fund simultaneously takes long and short positions in companies involved in mergers and acquisitions. Here, the market is expected to value the probability that the transaction will not take place higher or lower than the fund’s management. – Distressed Securities: Funds in this strategy invest in companies that are experiencing financial or operational difficulties. – Regulation D: This strategy invests in companies with thin capitalization (small caps, micro caps) that raise their money through private capital markets. Here, the hedge funds usually make their investments in the form of shares, convertible bonds or other derivatives. In the process, the fund usually receives a convertible bond from the company in exchange for a contribution to the company. Typically, the hedge fund then holds long positions in the convertible bond on the one hand and short positions in the shares on the other, and often additional positions in the form of options. At the end of the term, the managers of the fund can decide whether to cash out or prefer conversion into shares. – High yield: generally securities that have a poor rating. However, the hedge fund’s management has the expectation that these high-yield (high interest bearing) securities will be upgraded to compensate for their inferior credit rating. – Managers of an event-driven fund typically devote extraordinary resources to targeted research (event-study analysis) to obtain information that is otherwise difficult to obtain. – See arbitrage, statistical, asset sales deal, cannibalization, balanced fund, burn-out turnaround, collateralized loan obligations, counterparty risk management policy group, domino effect, earn-out clause, euphoria phase, headline hysteria, Hedge Fund Dangers, Hedge Fund Strategies, Global Macro, Index Arbitrage, Long-Short Arbitrage, Micro Hedges, Recapitalization, Restructuring, Risk Monitoring, Articulated, Rush to the Exit, Shark Watcher, Whistleblower, Single Hedge Fund, Death Spiral.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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