Hedge funds see big gains on dividend curve trades
A popular relative value strategy delivered unexpected profits when companies axed payouts
A dividend arbitrage strategy popular with hedge funds saw gains of up to 10% last week as companies cancelled or deferred shareholder payouts, causing the Eurostoxx 50 dividend futures curve to invert.
Hedge funds that trade the dividend curve typically short the second-year contract and go long four- or five-year instruments. In normal markets, the front-year contracts barely move as they represent announced dividends, or payouts relating to current cashflows. That changed last week as
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