The merger arbitrage strategy is designed to take advantage of price discrepancies that exist for companies involved in a merger; can be used as a hedged or alternative investment strategy that benefits by purchasing companies at prices below the target price and capturing the remaining premium; and targeting this spread seeks to deliver returns that are generally immune from fluctuations of the broader market. Additionally, merger arbitrage strategies have historically generated relatively stable returns across various market environments.
“Allocating from both equity and fixed income sleeves resulted in an improved Sharpe ratio (return per unit of risk), and lower volatility (standard deviation),” Lacuesta said.
Looking ahead, Bruno argued that M&A activity is expected to remain robust in 2019.
“We see opportunity in M&A as tax reform, deregulation across select industries, and continued economic expansion provide a high likelihood that record M&A activity will continue,” Bruno said.
Financial advisors who are interested in learning more about alternative investment strategies can watch the webcast here on demand.