“Merger arbitrage offers several potential benefits for investors, including increased diversification and the potential ability to dampen the impact of rising market volatility. In addition, given its negative correlation to the overall fixed income market, a merger arbitrage strategy may also be an appropriate investment vehicle in a rising interest rate environment,” Petersen said.
Along with its drawdown protection potential, a merger arbitrage strategy can also improve the risk-to-return profile of a traditional investment portfolio since the drivers of return for this type of strategy are isolated from broad market moves.
Consequently, since the strategy is not expected to be highly correlated to other asset classes over time, investors may find a stable platform in stormy weathers if U.S. markets suddenly correct, which is more likely to happen in an extended bull market condition.
Financial advisors who are interested in learning more about the merger and acquisition arbitrage strategy can register for the Tuesday, August 7 webcast here.