, Columnist
The Reason Merger Arbitrage Funds Aren’t Doing Well
Evidence suggests that returns are more dependent on financial stress than volume of deals.
This article is for subscribers only.
Mergers and acquisitions are booming, with 2018 projected to be the first year that global deal volume breaks $5 trillion. But merger arbitrage funds, which attempt profit on perceived market inefficiencies before or after an M&A deal is announced, are not doing well. The last three months for which data are available represent the first time MAFs have lost money three months in a row, and represent the second-, third- and sixth-worst months since data begins in 1999.
This defies the historical pattern shown in the graph below from 1997–2017, which shows higher levels of merger activity are typically associated with better returns for MAFs.