Approaching Event Driven Case Study

When tackling an event-driven case study involving a closed-end fund, here’s a structured approach based on the most helpful WSO content:

1. Understand the Event:

   • Identify the specific event impacting the closed-end fund (e.g., merger, liquidation, restructuring, or activist involvement).
   • Assess the timeline and likelihood of the event occurring.

2. Analyze the Fund’s Current Pricing:

   • Evaluate the fund’s Net Asset Value (NAV) versus its market price. Closed-end funds often trade at a discount or premium to NAV, which can be influenced by the event.
   • Look for inefficiencies or mispricings that the event might correct.

3. Scenario Analysis:

   • Develop pre- and post-event scenarios. For example, if the event is a liquidation, calculate the expected NAV distribution and compare it to the current market price.
   • Consider probabilities for each scenario and weigh them accordingly.

4. Catalyst Identification:

   • Pinpoint what will drive the price change (e.g., shareholder approval, regulatory clearance, or market sentiment).
   • Assess the risks associated with the catalyst not materializing.

5. Hedging and Risk Management:

   • If applicable, hedge your position to mitigate risks. For instance, if the fund holds significant exposure to a specific sector or asset, consider offsetting that exposure.
   • Be mindful of liquidity and transaction costs.

6. Leverage Resources:

   • Dive into WSO’s financial modeling resources, particularly those focused on event-driven strategies.
   • Review case studies or examples of similar events to understand how they played out.

For more detailed frameworks or templates, you might explore WSO’s financial modeling courses or hedge fund interview prep materials, which often include event-driven scenarios. If you need further guidance, feel free to reach out!

Sources: I work in event driven / arbitrage. Here are some career advice for you, Q&A: London L/S + event-driven analyst, Q&A: London L/S + event-driven analyst, Starting a small hedge fund, Q&A: Credit Analyst (Multi-Strat Credit Fund) >$5bn Fund