Alternative Assets and Strategic Allocation: Rethinking the Institutional Approach

CHAPTER 11

Event-Driven Investment

Event-driven investing achieves its objectives if the manager of a fund correctly anticipates a particular corporate action—an issuer announcing its intention to repurchase securities, regulators blocking an acquisition, a firm entering or being discharged from bankruptcy, a credit rating raised, a drug trial abandoned, and so on. Although most of its trades are clearly directional in nature, it contrasts with traditional investment approaches that rely on the realization of value over time, in that its returns, or at least the bulk of them, derive from binary and in some instances virtually momentary occurrences. The line between it and various conventional, long-only investment approaches is not sharp—conventional ...