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Event-Driven Investment Strategies

Event-driven investment strategies try to exploit market inefficiencies that occur around corporate or market events. Event types that are commonly in scope of event-driven investment strategies are:

  • Mergers and acquisitions
  • Earnings announcements
  • Restructuring announcements
  • Share buybacks
  • Special dividends
  • Spinoffs
  • Announcements of economic indicators (e.g., unemployment rate, interest rate changes)

Event driven funds invest in almost all liquid asset classes, i.e. equities, fixed income instruments and derivatives. The strategies can be differentiated in terms of their investment horizon. High-Frequency investors have typically an investment horizon of less than five minutes and aim to profit from fast information processing. Merger-arbitrage funds in contrast invest often over time periods spanning a horizon of several weeks up to several month, seeking to capture the spreads in the transaction bid and the trading price after a merger or acquisition announcement.