Merger arbitrage experiences resurgence

But strategy sees spreads under pressure


After several years of underwhelming corporate activity, mergers and acquisitions (M&A) is predicted for a comeback in 2014, with new deals evidencing a resurgence in arbitrage opportunities as the year looks set to be a strong one for takeovers.

Arbitrageurs buy shares of the firm being acquired and short the shares of the acquirer. But a downturn in deals saw many hedge funds exit the strategy, and also witnessed large outflows from other merger arbitrage products. According to financial data

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