By Kit R. Roane
Event-driven funds pitch themselves as being less correlated
with the vicissitudes of the market than other hedge fund
strategies, as they can cash in on mergers when times are good
and profit from corporate distress during downturns.
But the uncertainty of a volatile summer and the ensuing
choppy markets have closed off many traditional sources of
investment for these funds. Although it is still up by more
than 5 percent on a 12-month basis, the AR Event Driven Index
has fallen by 8.11 percent this year, making it the
worst-performing strategy in the database by far. Event-driven
funds lost a hefty 4.42 percent in August and another 4.71
percent in September.
Such losses by event-driven funds are particularly troubling
because these funds seemed to offer great promise at the start
of the year. In 2010, the AR Event Driven Index rose...