Event Investing amid Washington Uncertainty

Chidem Kurdas

The federal government shutdown and looming debt ceiling are not the kind of issue event-driven managers typically deal with. Nevertheless, some investors look to such managers as a haven in markets roiled by uncertainty emanating from Washington.

Strategies that seek situations where there may be profits to be made from one or more events returned almost 2.5% in September, according to the Greenwich index. That beats all hedge fund segments except long/short equity (which returned 3.5% for the month).

Year to date, event-driven is the best performer with about 10.2%. While this may look puny besides the nearly 20% rise of the S&P 500, event-driven funds are significantly less choppy than the stock market. At a time of rising market volatility, that’s a major advantage.

Event or catalyst hunters often invest in businesses likely to be involved in a merger or acquisition. A distressed specialist may look for catalysts that will turn a troubled business around or result in bankruptcy and reorganization.

One event-driven outfit that caught the attention of allocators is BHR Capital, founded by Neil Ramsey, an alumnus of Boston Consulting Group, and the team that previously managed distressed debt shop Bay Harbour.

Though launched in late 2009-early 2010, an almost impossible time for raising capital, the BHR credit fund started with $300, according to an article at the time in trade publication HedgeFundAlert. Last year it received money from at least one fund of funds.

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