What are some good event driven/special situation hedge funds?

I am planning to apply to some event-driven hedge funds. Just graduating in couple of weeks, and will now start applying. It would be great if someone can suggest me some names. Thank you.

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May 21, 2017 - 1:29pm

Distressed Debt Investing - Major hedge funds? (Originally Posted: 03/09/2007)

I was wondering if anybody knew any major hedge funds that do distressed debt investing. I'm going into Lev Fin at a BB next year... is this a good place to be if I would like to be at such a hedge fund?

Any thoughts in general would be much appreciated.

May 21, 2017 - 1:31pm

I kinda agree. Top Sponsors group place better into distressed shops.

May 21, 2017 - 1:35pm

Event-Driven HFs (Originally Posted: 08/29/2007)

My understanding of Event Driven HFs is that they invest in events such as spinoffs, corporate restructurings, bankruptcies, warrants etc

Is this accurate ? Would appreciate it if someone could provide a more detailed overview

Thanks

May 21, 2017 - 1:36pm

Okay - peace Seanc. A lot of your other posts have been antagonistic and don't do you any favours considering that you are looking for help but I'll extend an olive branch here because I believe there is some good in all.

My advice may also help others looking at the same thing.

Event driven funds are exactly as described - the invest in situations with a defined catalyst. The brief is generally kept as wide as possible to maximise the number of opportunities but usually centres on arbitrages in bid situations.

The key skills they look for are;
Anal attention to detail (this is why lawyers and young bankers are often recruited). You will have to know a deal inside and out and assess the likelihood of a deal breaking.
Networking. These funds try to leverage every contact that they have to work an angle on a situation (again, this is why young bankers are targetted).
Creativity. You will have to look at all of the available instruments on a company and formulate a strategy the offers the best risk-reward relationship. Beyond this, how do you envisage the acquirer to be positioned post-deal?

Hope this helps.

May 21, 2017 - 1:37pm

risk arb has made a good come back (kind of died in after being huge in the 80's, early 90's), but event driven funds more broadly speaking, as John Mack points out, are short-term catalyst driven funds that see an event occurring and believe they can assess the risk/reward ratio of the event occurring and its impact to a security price to earn good risk-adjusted returns. Risk arb, takeover candidates and orphan CDS for LBO's have been the focus of many event driven funds recently, although that is going to change with the drop-off in LBO's and M&A in general. Some also look at bankcruptcy's and cap structure arbitrage when risk arb slows down

May 21, 2017 - 1:39pm

the spreads aren't that small. Historically, in a bid situation you often find that the target trades above the offer on the expectation of a counterbid or greenmailing.

On top of this, they supercharge the returns through leverage.

May 21, 2017 - 1:41pm

your annualized return (so if a company is trading at 32, offer price is 34 and closing is 2 months, spread is 37.5%--34/32-1)*12mnths/2mnths)~this is what FDC looked like a month or so ago. Spreads in the last two/three years have been in the low single-digits, so HF's would lever up to increase the return. In an LBO, you just take a position in the target. In a a strategic M&A deal, you will offset you long position in the target with a short in the acquiror to hedge the risk.
Risk arb is somewhat akin to picking up nickles in front of bulldozers, you are trying to avoid the bulldozers (if a deal falls apart or is recut, you could lose a substantial portion of your money depending on the premium being offered for the target). In the recent market, do the credit market and equity market conditions, people are worried about deals closing/being recut, so spreads have blown out and are attractive (if you believe they will close). People are worried that some of the LBO deals will fail to close b/c the banks may find a way to get out of the deals with the PE firms (they won't) or biz macs might be more prevalent in certain industries. Accredited Home Lenders is a great example, Lone Star offered 15, mortgage market has tanked, Lone Star called a Mac and is trying to walk away, Accred is suing them, Lone Star re-offered at 8.15 and Accred rejected saying that initial offer of 15 should stand (Sallie Mae is another one). 70-85% of your positions will close as stated, it's just the 10-15% that don't could literally wipe out all of your profits and lead to losses depending on the amount of leverage being employed

May 21, 2017 - 1:42pm

In its simplest form it's the difference between the traded price and the offer on the table.

eg If company A has announced a takeover of company B for $10/share, you'd expect the shares of company B to trade at close to $10.

If the spread is big, it could be because the market expects the deal to fall apart. If you have a strong view that it will go through at the agreed price then you buy company B shares.

May 21, 2017 - 1:43pm

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