WEST PALM BEACH, FL (www.hedgeco.net) – Raza Hussain, a senior hedge fund analyst at Credit Suisse said, That Merger and Acquisition hedge fund strategy may benefit from strong economic growth andcorporate governance in 2004. Analysts believe the outlook for the M&A managers have improved from previous years, according to Hussain, “The number of M&A transactions is rising in the lightof the favorable economic environment� he added, �That has created more opportunities for the strategy.”
Merger and Acquisition managers generally target takeover firms, by selling the shares of their potential buyers. In 2004, Merger and Acquisition managers earned an average of 5.5 percent, such managers suffered dearly from the collapse of the technology sector about five years ago.
The strategy is now bouncing back; analysts believe the bounce back is resulting from improving global economic conditions. Part of the reason also has to do with improved corporate governance problems resulting from publicized scandals such as Enron or Arthur Anderson. Alexander Ineichen, managing director at UBS Investment Research, said, �Merger arbitrage has been in a weak phase since activity collapsed after the technology bubble burst.�
There are expectations that a pick in acquisition activities is quite likely, but some analysts believe that if the US Federal Reserve pushes US interest rates further up, it may increase borrowing costs, which in turn may depress borrowing by hedge fund managers. Gavin Rankin, Europe product manager at Citigroup Private Bank also believe that capacity constraint may have reduced M&A opportunities for managers using the strategy.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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