A Comparison Between Different Hedge Fund Strategies in the Recent Financial Crisis

Event-driven strategies try to exploit pricing inefficiencies caused by anticipated specific corporate events, the Event Driven Index (HFRXED) groups all hedge funds indices that attempt to reach this objective. More precisely, event-driven managers maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. Now I can describe the two main event-driven substrategies that I have chosen with their relative indexes.
The Merger Arbitrage Index (HFRXMA) synthesizes merger arbitrage strategies which employ an investment process primarily focused on opportunities in equity and equity related instruments of companies which are currently engaged in a corporate transaction. Merger arbitrage involves primarily announced transactions, typically with limited or no exposure to situations which pre-date, post-date or situations in which no formal announcement is expected to occur. Opportunities are frequently presented in cross border, collared and international transactions which incorporate multiple geographic regulatory institutions, with typically involve minimal exposure to corporate credits. Merger Arbitrage strategies typically have over 75% of positions in announced transactions over a given market cycle.
On the contrary, the Distressed Securities Index (HFRXDS) summarizes distressed restructuring strategies which are characterized by companies trading at discounts to their value because of potential bankruptcy. Managers are typically actively involved with the management of these companies and employ fundamental credit processes focused on valuation and asset coverage of securities of distressed firms. In most cases portfolio exposures are concentrated in instruments which are publicly traded, in some cases actively and in others under reduced liquidity but in general for which a reasonable public market exists.