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Event driven investing ideas for teens

event driven investing ideas for teens

One way to simplify the investing process even further is with an investing app. One popular mobile app that may help here is called Stash, and. It's never too early to start investing. Learn about the best investments for teenagers and how to start investing young. They have been trading longer than many adults, and are learning valuable lessons about investing early. MarketWatch speaks to four. FOREX I E The profile settings or games are screen updates with some servers and. Based on the 1 silver badge. What do you sometimes called factory.

The young Minneapolis pair has over , followers and The pair started to step up their investing roughly a year and a half ago — finding, like many, the pandemic had afforded them additional time for the endeavor. Affiliate marketing on TikTok is one income stream for them. The young investors now make it a point to scrutinize the long-term cash flows of companies and apply lessons learned from Buffett about interpreting financial statements.

Progenity PROG , which works with big companies to offer employee maternity and paternity benefits, is one of their top picks right now. As for advice to even-younger trading enthusiasts? Barbara Kollmeyer is based in Madrid, where she leads MarketWatch's pre-markets coverage of financial markets and writes the Need to Know column. Follow her on Twitter bkollmeyer. By Barbara Kollmeyer. Tom DeMark identified the bitcoin downside in March.

How to use real estate investments as an inflation hedge. Is this possible? How to break up with your financial adviser. She will leave it to him when she dies. Do I have a claim on this home? Is that fair? Barbara Kollmeyer. Search Clear. Advanced Search. All News Articles Video Podcasts. Private Companies.

Search Tickers. Investors can earn money from dividends that companies pay to their shareholders as well as through capital gains when the value of the stock increases. Stocks tend to be volatile assets , meaning they can undergo major price shifts in a short period of time. Virtual trading can give your teen an idea of how the stock market works, without putting any actual money at risk.

A bond is a type of debt security. Bonds usually provide a fixed income, thanks to the interest payments the bond issuer makes throughout a set period of time. Funds, primarily mutual funds and exchange-traded funds ETFs , are popular investments that allow you to gain exposure to many different securities in one investment.

Mutual funds and ETFs are known as "pooled investments," because they pool together the money of many investors. If your child is under 18 years old, the most effective way to start investing for or with them is to open a custodial account. This means that if a parent puts money in a custodial account for a child, it is considered an irrevocable gift and cannot be taken back.

In other words, that money now belongs to your child. The two are almost identical but vary in the types of assets they can hold. UGMA accounts can hold financial assets like stocks, bonds, mutual funds, and cash, while UTMA accounts can hold all of those same assets as well as physical assets like real estate.

Another type of custodial account is a custodial individual retirement account IRA , which allows teens and their parents to start saving for retirement before they reach adulthood. Most people understand that they should be investing, but many may not have considered the benefit of investing for or with their teens. Getting teens started with investing at a young age can help them to build wealth and financially prepare for the future as well as provide them the financial literacy they will need to succeed later in life.

Investors under the age of 18 are generally prohibited from opening their own brokerage accounts. However, adults can open a brokerage account on behalf of a child of any age, allowing them to get a head start on investing. Keep in mind that even in the case of a custodial account, the adult custodian, not the child, has control of the account and the investment decisions.

Federal Deposit Insurance Corporation. Securities and Exchange Commission. Internal Revenue Service. Table of Contents Expand. Table of Contents. What Teens Should Invest In. Opening an Investment Account for Teens. The Bottom Line. Part of. An Introduction to Investing. Paying For College.

Opening A Credit Card. Experts Weigh In. By Erin Gobler. Erin Gobler is personal finance coach and a writer with over decade of experience.

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Not only does investing as a teen help young adults prepare financially for the future, but it also helps teach them financial literacy. For many, personal finances are a source of stress and anxiety. By helping your teen to build their financial literacy from a young age, you may help them to feel more confident and less anxious about money matters later on.

With so many investments to choose from, all of which have varying levels of risk , it can be difficult to know where to start investing. Below are some of the most common investments available to teens as well as some of the downsides you should be aware of. A high-yield savings account HYSA is the most basic way for a teen to start earning a return on their money.

Savings accounts have been around for a long time, but more financial institutions now offer high-yield savings accounts, which offer a higher interest rate than a standard account. With a higher interest rate, your funds will grow more than they would in a typical savings account.

Unfortunately, even savings accounts with high yields have very low rates of return, compared to other investments. A certificate of deposit CD is a banking product similar to a savings account through which a teen can earn interest from their savings.

The key difference is that CDs require you to keep your money in the account for a specific period of months or even years to earn the promised interest rate. The downside, however, is that your money is essentially locked up for a period of time. A stock is a way to take a piece of ownership—also known as "equity"—in a publicly traded corporation.

When you own a stock, you become a shareholder and part-owner of the company. Investors can earn money from dividends that companies pay to their shareholders as well as through capital gains when the value of the stock increases. Stocks tend to be volatile assets , meaning they can undergo major price shifts in a short period of time.

Virtual trading can give your teen an idea of how the stock market works, without putting any actual money at risk. A bond is a type of debt security. Bonds usually provide a fixed income, thanks to the interest payments the bond issuer makes throughout a set period of time.

Funds, primarily mutual funds and exchange-traded funds ETFs , are popular investments that allow you to gain exposure to many different securities in one investment. Mutual funds and ETFs are known as "pooled investments," because they pool together the money of many investors. If your child is under 18 years old, the most effective way to start investing for or with them is to open a custodial account.

This means that if a parent puts money in a custodial account for a child, it is considered an irrevocable gift and cannot be taken back. In other words, that money now belongs to your child. The two are almost identical but vary in the types of assets they can hold. UGMA accounts can hold financial assets like stocks, bonds, mutual funds, and cash, while UTMA accounts can hold all of those same assets as well as physical assets like real estate.

Another type of custodial account is a custodial individual retirement account IRA , which allows teens and their parents to start saving for retirement before they reach adulthood. Most people understand that they should be investing, but many may not have considered the benefit of investing for or with their teens. Getting teens started with investing at a young age can help them to build wealth and financially prepare for the future as well as provide them the financial literacy they will need to succeed later in life.

Investors under the age of 18 are generally prohibited from opening their own brokerage accounts. However, adults can open a brokerage account on behalf of a child of any age, allowing them to get a head start on investing. Keep in mind that even in the case of a custodial account, the adult custodian, not the child, has control of the account and the investment decisions. Federal Deposit Insurance Corporation. Professional Skills.

Finance Interview Prep. Corporate Training. Technical Skills. View all Free Content. What is Event-Driven Investing? In This Article. Distressed Investing : Conversely, distressed investing performs best in recessionary periods, as more companies become prone to financial distress. Inline Feedbacks. X Please check your email. Learn Financial Modeling Online. X Phone. You are going to send email to. Move Comment. The investments can be in the form of going long coupled with a short position, reliance on derivatives for downside risk protection, and more.

The strategy often pairs a long position in the convertible security with a short in the common equity. An activist investor attempts to be the catalyst for change in a company, which is typically underperforming and has fallen out of favor with the market. The active engagement of the investor and implementation of recommended corporate changes can lead to high returns.

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Fibonacci theory in forex By Michael Keenan January 24, The information on this site does not modify any insurance policy terms in any way. Maersk is bringing ocean shipping and rail logistics closer. How old do you have to be to invest in stocks? Investing involves risk including the potential loss of principal. Jones, whose first love remains football, hopes to one day combine his passions via a hedge fund helping professional athletes manage their money.
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Walking to work at Rangeley Capital, a new hedge fund in Midtown, I worked out which opportunities I would seize. Rangeley focuses on event-driven investing - where corporate events hide valuable opportunities long enough for investors to take positions before events play out and that value is revealed. My job was to find the best ones. The best ideas may have involved uncertainty as to how they would play out, but that uncertainty sometimes drove their prices down.

I liked that because I wanted safety. One could find safety when security prices have been driven down to bargain prices. But what if the prices are right? I want to sort out prices driven to levels that make little sense, prices that can't be justified by likely outcomes, prices that are just wrong. I had three tools in my tool kit. The first was value investing. A majority of the most successful investors are value investors.

But this outlook is both the best and the most underrated. Despite the success of value investing over decades, the number of new adherents has been small enough so that the advantage has not been lost. This durable advantage remains a mystery. My theory is that there are plenty of people smart enough to be value investors, but not enough with both the brains and the fortitude to stick with it over a long enough time.

But whatever the reason, it works. Securities can be valued by comparing the price to their cash flow, earnings, and assets. The cheaper, the better. I did not want to spread myself to thin. I could not follow everything. I could have started at the beginning of the alphabet. I could use the computer to screen for value, but I never liked to do that because many of my favorite opportunities tend to fail to show up on traditional screen.

Instead, I would use corporate events as my hunting grounds, because these events could hide value and confuse markets. Analyzing such events would be my second tool. Thirdly, I would study investors as well as investments, searching for situations where investors were particularly constrained.

When it comes to investing, I can be a bit of a coward. I do not want to pit my judgment against yours. I far prefer to take a position at a price based on constrained counter-parties that must sell or must buy when I am selling for one reason or another. Few investment ideas satisfy all three criteria, but I was willing to watch and wait. Almost all of my work is based upon primary resources. Instead of reading others' analysis, I prefer to go right to the source.

In the case of most investments, that involves reading reports filed with the SEC and asking follow-up questions of a company's management or board, while also seeking answers from the company's competitors, vendors, customers, and other knowledgeable players. However, there are a few secondary sources that I use for convenience.

One is Goldman Sach's Hedge Fund Trend Monitor , which is a handy aggregator of where major hedge funds are most exposed. High hedge fund concentration in a given security can be worth understanding. It is not always positive or negative, but is worth knowing because hedge funds are a large part of the market's trading volume, and are especially large in the kind of event-driven opportunities that I tend to invest in.

Hedge fund redemptions can force funds to sell such positions, driving down prices in such positions regardless of their underlying merits. It is important to know that can happen, and to either avoid such concentrated hedge fund bets or to buy them after forced selling has taken its toll.

This proved to be too rough a time for the equity market to sort through how to value a new and complicated structure. Liberty's stock was cheap relative to its assets, and its assets were cheap too. Due to this double discount, it was probably worth between four or five times what it cost.

It was a perfect investment for Rangeley - cheap, event-driven, and sold without sensitivity to its price by hedge funds that needed liquidity. One of my goals became to find at least one such investment each year. The security and its components have been perpetually event-driven opportunities, and they have been values the entire time. At such meetings, he frequently came up with new and complex structures.

Through buybacks and various combinations of his assets, he has been able to capture much of the very discounts that he created. After over half a decade, it is still an event-driven opportunity. What are the opportunities to invest in parent companies for net negative costs today?

Opportunities such as buying DirecTV at a discount via Liberty Media, known as "parent-subsidiary stubs," are among my favorite opportunities. Yahoo has been used by investors as the only convenient way to invest in Alibaba. But that changed with Alibaba's recent IPO.

Now, investors seeking exposure to Alibaba can do so directly. The subsequent abandonment of Yahoo's equity left it at a market capitalization less than its Asian assets. The domestic web portal is essentially free. To subtract the Asian stakes, one can buy ten shares of Yahoo and then short approximately twenty shares of Yahoo Japan and four shares of Alibaba.

For that, you get exposure to its domestic web portal. What then? The easiest way to monetize Yahoo Japan would be if it or all of Yahoo were taken private by its largest holder, SoftBank. As for the stake in Alibaba, the most tax-efficient solution would probably be for Alibaba to buy Yahoo.

Negative stub values such as these are real arbitrage opportunities worth exploring. In theory, one can deserve a big discount if the management is going to destroy value through malinvestment. The major caveat to this idea is that Yahoo CEO Marissa Mayer could go on an acquisition binge, in which she potentially squanders her company's cash on dubious, pricey tech targets.

In practice, that is unlikely in the case of Yahoo, where investors are actively encouraging a value-enhancing resolution of the curious puzzle of an equity stub that costs less than nothing. The partners at Rangeley Capital spent the final month of on an idea that I selected as my best investment prospect for The fourth quarter of was the worst quarter for almost every asset class, leaving many promising bargains in its wake.

Among the most deeply discounted was the senior secured loan market. Lehman Brothers had filed for bankruptcy late in the third quarter, and had flooded the market with its senior secured loan portfolio. Other leveraged holders with overlapping portfolios or direct exposure to Lehman became forced sellers too, as their prices were driven down.

Highly leveraged, forced sellers usually liquidated their assets in a Bid Wanted In Competition BWIC process that immediately sold assets to whatever bidder could be found. Sometimes, billions of dollars of loans traded hands within the course of a week as leveraged structures liquidated.

This resulted in prices that would normally be associated with defaulted securities, even though few were in default. The BWIC sales process is an extreme of price-insensitivity and time-sensitivity, which makes it ideal for buyers who are price-sensitive and time-insensitive.

These loans are first to get paid in default, and have a lien on assets. The two key assumptions are the default rate and the recovery in default. Even with these draconian assumptions, the senior secured loan market was attractive at prices that had plunged to around sixty percent of par value after trading close to par for years. I wanted a Liberty Media-like double discount for our investment candidate, and found it when we reviewed the Investment Company Act of According to Section 18, closed-end investment companies had strict limits to their leverage.

The problem was that their debt was relatively stable, while their equity prices were plunging. This price move had the perverse consequence of increasing their leverage to the point that they were forbidden to make any distribution payments to the closed-end fund CEF shareholders. That is when the bottoms really fell out of their prices. I called many of the managers of these funds. They were highly diversified, and for the most part, all owned substantially similar portfolios.

I had one request and one question. My request was that they hold onto their securities if they default. My question was simply, "What are your shareholders asking? When the distributions stopped, they sold at any price they could get. By the beginning of , we had bought a substantial position in PFN, along with various other senior secured debt vehicles, such as Ares Capital Corp.

In hindsight, Ares worked out much better than PFN, but PFN was where we decided to put much of our capital, alongside one other Pimco fund and several similar funds managed by Eaton Vance. January was fine, but February and early March were awful. We held onto our investment, knowing that only a few months of retained interest payments on the performing loans would deleverage the CEFs enough to allow them to turn back on their distributions.

The distributions were turned back on, the prices stabilized, and the rest of the year was positive for this idea. Bill Gross, Pimco's founder, assumed direct responsibility for the fund's asset allocation. None that I am aware of, but I would appreciate suggestions in the comment section below. Today, I see no such opportunities in either the senior secured debt market or in closed-end funds. Where started with liquidity constraints and forced selling, by today the market is awash with liquidity.

The market is more like that which led to the credit collapse that I tried to exploit. I have no remaining loan exposure, but were I forced to choose, I would rather short it than own it today. The market valued Loral at less than the value of its Telesat stake, perhaps because Telesat was not consolidated in Loral's financial reporting. LORL's board and management were likely to take specific steps to maximize shareholder value. It was not as ugly as loans in , but it was a rough start to the year.

After initial weakness, it recovered substantially over the rest of the year. Is there such an opportunity today? Yes, Loral has performed well since this idea was first initiated, but it is still attractive today. I thought that Loral would have been wrapped up by now. In the first half of , the fundamental value of Loral's investment in Telesat has grown significantly. During the second quarter:. At today's price, Loral is for sale at a discount to its standalone value, and is likely to be sold within the next few years, when its Chairman decides to exit his investment.

The company was the parent of LaBranche Financial Services, which offered securities execution and brokerage services to institutional investors and LaBranche Structured Holdings, a market-maker in options, futures, and ETFs on various exchanges. A year earlier, LaBranche had sold its NYSE designated market maker, redeemed its debt, and authorized a share buyback. It was event-driven, since the company was buying back shares as quickly as it could and was selling operations. There was a benign explanation for the price in that no sell-side analysts covered it, and few people cared about it as an investment.

The major caveat was that it was run by CEO Michael LaBranche, a cautionary tale of nepotism and generational mean reversion. Where can I find such an opportunity to buy a pile of cash and NOLs at a discount today? One such opportunity is QLT Inc. QLTI , a small pharmaceutical company with a tumultuous past. In , QLT had three drugs on the market. The company's key drug, Visudyne, was losing market share to competitors. It sold the two other drugs, and focused on its pipeline and technology.

The company was spending heavily on the development of a new technology to deliver medication to the eye through punctal plugs. After a few years, activist shareholders were unhappy with the company's spending, and disagreed with the potential value of the company's pipeline. A group of activist shareholders replaced several board members, and the board has since restructured the company by:.

The bank operates a stable regional banking model, with a high-quality loan portfolio and low fundamental risk. We originally made a significant investment in OSHC by participating when the bank converted from mutual ownership to public stock ownership. This type of conversion requires three years from going public until Ocean Shore is allowed to be purchased. Our thesis was that the bank would grow its book value and reduce its discount to that value during this three-year waiting period.

The three-year regulatory window on Ocean Shore would end in December While the equity performed well in , management failed to sell to a strategic buyer. I am writing to urge the Board of Directors to undertake a strategic review. This would be a board-level decision. Our hope and expectation is that the board will make the right decision on behalf of Ocean Shore's owners. We have been owners of Ocean Shore since the company fully converted from a mutual in I want to congratulate the Board on the successful completion of the conversion and the expiration of the three year moratorium on corporate actions.

Over the past several years, this process has created significant value for all shareholders in the Company. The current Board of Directors also has important duties to Ocean Shore owners. Looking ahead, since the moratorium on corporate actions has expired and Ocean Shore is in a strong position regarding its loan portfolio and overcapitalization, we believe it is an ideal time to undertake a strategic review of potential avenues to maximize value for Ocean Shore's owners.

To maximize value, the Board of Directors should consider the possibility of a sale. Ocean Shore continues to trade close to tangible book value, a lower multiple than its peers. Even using conservative price estimates, a strategic buyer would likely pay a substantial premium to acquire the company today. It is in the interest of all shareholders for the Board of Directors to consider options that may be available to unlock substantial value for shareholders.

As such, a strategic review would be in the best interests of the company and its stock holders and would likely receive a positive reaction from the capital markets. Early in , Beneficial Mutual Bancorp BNCL will have completed its demutualization, and could be well positioned to buy Ocean Shore for a substantial premium to its current price. Where is there such an opportunity available to today's investor? We are still holding ours.

One possibility is Putnam County Savings Bank. This growing financial institution is likely to convert to a publicly traded bank within the next few years. You can visit any one of its branches and purchase a certificate of deposit CD. This CD will give you a right to participate in an equity offering, if one is launched as anticipated.

Typically, you would get to buy shares at a substantial discount to their market value. Gramercy now ticker GPT was my favorite long equity idea for The key to the investment is that the stock appeared to have a substantially negative book value, but that was misleading, because its substantial CDO liability was non-recourse to the parent company. The true financial health of a healing, growing business was masked by this CDO exposure. The shares substantially closed the discount to their intrinsic value during the course of the year.

Gramercy had been returned to financial health. Since our investment in Gramercy, we have been on the lookout for healthy companies that suspended their common and preferred dividends, and would be likely to turn them back on in the near future. But as of today, we are still looking. A contingent value right CVR is a contract traded like a public equity.

The company pays the owners when pre-specified milestones are achieved. In extreme cases, this overcrowding may push prices too far in one direction and again create a state of market inefficiency but in reverse. Astute managers are keenly aware of this. Certain event driven managers specialize in these situations and may implement trades that are the opposite of what was initially expected and take a position against the majority. Economists may welcome market efficiency but event driven investment managers take the opposite view.

That is, until they fully execute their initial trade. The investment focus of the manager is to analyse the effect on security prices due to the event in question. This is in contrast to traditional equity investment funds who focus on analysing and researching company earnings or dividend streams. Investment firms using event driven investment strategies employ teams of specialists who are experts in analysing corporate actions.

The manager then makes a decision on how to invest in the situation. This decision makes use of the available financial instruments such as stock or bonds. To illustrate, we again use a merger arbitrage example. Once an acquiring company announces its intent to buy another company, the stock price of the target company typically rises. However, it usually remains below the acquisition price. This discount, known as the spread , reflects the uncertainty about whether the acquisition will complete or not.

Event-driven managers analyze the deal particulars, which may include but are not limited to the reasons for the acquisition , the terms of the acquisition and any regulatory issues. With this information, manager determine the likelihood of the acquisition successfully completing. If the target stock price suggests a lower likelihood of deal completion, the manager will buy the stock.

The manager is comfortable buying the stock, as opposed to the traditional manager who does not have the expertise to determine if the deal will go through. The traditional manager often sells the stock before the acquisition completes and realizes a profit but sacrifices the remaining upside. This remaining upside, or spread , is where the merger arbitrageur can profit.

One can differentiate event driven investment strategies by their investment horizon. The different types of strategies and investments made by event driven managers lead to a spectrum of investment horizons.

High-Frequency investors typically have an investment horizon of less than five minutes. The aim of these strategies is to profit from high volume, low margin trading. Tender offers in merger arbitrage can complete in a number of weeks. Although the overall average completion time for a cash deal is usually months.

Whereas investment in debt securities during a bankruptcy process may require a number of years if the stakeholders do not reach a consensus on how to compensate the lenders. Perhaps the biggest know occurrence of implementing event driven investment strategies is the subprime crisis.

Some traders foresaw the dangers of the overly generous lending practices within the mortgage industry. Subsequently, they accordingly took positions in an array of financial instruments. Following the initial reports and effects on the wider financial system, many traders took advantage by taking large short positions primarily in finance related stocks.

Reverse merger arbitrage also became commonplace. This is where traders speculated on the break-up of specific deals primarily due to the lack of available financing. Event-driven investors must be willing to accept some risk. Corporate events do not occur as planned and this requires the flexibility to re-evaluate constantly. Event driven investors must have the necessary skill set to assess accurately the likelihood of this occurrence. A significant risk in this arena is liquidity risk.

This is especially true for high yield bonds and illiquid investments such as small cap stocks or certain derivatives. During a market panic, exiting these products can be difficult. The manager must be aware of over exposure in these investment classes.

As previously mentioned, merger arbitrage accounts for a large portion of event driven trading. Whether or not a deal completes successfully, the path taken to completion is rarely a smooth one. Deal delays, or deal extension risk can destroy the profitability of the trade.

In times of economic downturn, it becomes more difficult to obtain financing. The subprime crisis provides numerous examples of this. A deal failure is the worst scenario for a merger arbitrager. When the credit cycle or economic cycle is in a downturn all complex investing strategies tend to suffer.

As a rule, consider a comparison of merger arbitrage to a high yield bond. If this high yield bond is beyond your risk tolerance, event driven trading strategies may not be for you. Sophisticated or large institutional investors typically use event driven investment strategies. These are primarily hedge funds, private equity firms and some mutual funds. This is due to the large amount of expertise necessary in analysing corporate events to execute the strategy successfully. Traditional equity investors, including managers of equity mutual funds, do not have the expertise or access to information necessary to analyze accurately the risks associated with many of these corporate events.

Event driven managers may specialize in one or more event driven investment strategies. Certain managers will cover as many bases as possible as events will come on their own schedule, not necessarily when the manager requires them. This is where strategy diversification can help. However, some event driven strategies are cyclical and therefore loosely predictable within the economic cycle.

As such, diversification using various combinations of strategies are complementary. For example, merger arbitrage is popular during times of economic expansion. As the economy cools down or moves into recession, distressed investing strategies become more prominent. This helps event-driven investors make profits that are more consistent. Event driven investment has traditionally been the playground of professional investors.

However, private individuals can access this strategy both directly and indirectly. Below is a selection of funds who focus on event driven investment strategies. Some of these funds are even more specific and focus on merger arbitrage. Investors can access these funds through regular fund investment channels. Alternatively, individuals can attempt to replicate and execute the strategies themselves. This may be impractical for some strategies but merger arbitrage can be straightforward.

Merger Arbitrage Limited provides two news where traders can initially source ideas. As a company experiences an event described above or a new unique event, opportunities for profit arise. This level of profitability may not always sound like a great investment opportunity but here in lies the attraction. Investors who have the expertise or are willing to put in the effort can evaluate the event and can choose whether to accept the risk return profile on offer. However, the return profile of event driven trading is difficult to summarize.

Complex strategies may provide returns similar to being long stocks in the broader market. Simpler strategies such as merger arbitrage tend to resemble bond like returns. When considering fund investment , understanding the fund strategies and its investment scope is of paramount importance.

An investor must also consider the competence of the manager as an investment factor. Merger Arbitrage Limited provides numerous resources for those interested in merger arbitrage. In addition to our book list , we also publish a list of prominent academic works. Sign up then! It's quick and FREE. Have time to share an article? It's very much appreciated!!

Event Driven Investment Strategies. What are Event Driven Investment Strategies? Special Situations Event driven investment strategies are sometime referred to as special situations investing. The Aim The aim of event driven investing is to produce consistently high risk-adjusted returns that do not correlate with the market. Investment Universe Event driven funds and traders invest in almost all asset classes. Types of Event Driven Investment Strategies.

One can execute an event driven investment strategy to profit from various scenarios in multiple ways. We provide non-exhaustive examples of the more common strategies and as per the expanded definition in the opening paragraph, we list three areas Corporate Events Market Events Natural Disasters from where event driven strategies may originate.

The definition and scope of the events is constantly evolving. Initially the focus was a corporate one but now includes such situations as natural disasters. Corporate Events. More Merger Arbitrage Considerations For more risks and deals complexities, we advise the reader to peruse previous Merger Arbitrage Limited articles such as deal extension risk. Restructuring, Dividends, Share buy-backs, Capital Returns Dividend arbitrage is a less common activity that an event driven manager may implement.

Spinoffs If a company decides upon a change in its corporate strategy, it may decide to spin off a subsidiary to shareholders. Capital Raisings, Rights Issues, Private Investment in Public Equity PIPE When a company raises capital by way of a renounceable rights issue, the event driven manager makes a simultaneous purchase of the rights and shorts the existing stock.

Capital Structure Arbitrage — Default, Reorganization, B ankruptcy Capital Structure Arbitrage takes advantage of mispricing within various securities of the same company, typically in a period of financial stress. Carl Icahn and Bill Ackman. They try to convince management to sell off the company or a subsidiary , change the management team, initiate stock buy-backs, or increase the dividend all with the aim of unlocking shareholder value.

The rewards can be considerable if the strategy is successful. Especially in this case as Carl Icahn lined up against him in defense of th e company. However, investors often piggy back these high profile strategies and consequently add weight to their influence thus increasing the chances of success. Market Events. Natural Disasters. Hurricanes, Earthquakes, Volcanic Activity There are many ways to insure property catastrophe risk.

Some examples are Insurance Reinsurance insuring insurers Retrocession insuring reinsurers Catastrophe bonds Industrial Loss Warranties. Market Efficiency. Strategy Implementation. Research The investment focus of the manager is to analyse the effect on security prices due to the event in question. Execution Event-driven managers analyze the deal particulars, which may include but are not limited to the reasons for the acquisition , the terms of the acquisition and any regulatory issues.

Event Driven Investment Horizon. Investment Horizon. Risks — Merger Arbitrage As previously mentioned, merger arbitrage accounts for a large portion of event driven trading.

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Investing with a Catalyst: Special Situations and Event Driven Opportunities

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