Amid the highest global merger and acquisition quarterly activity in five years, the Paulson Merger Funds low volatility arbitrage strategy returned near 2% in the first quarter of 2014.
After a strong start to the year, gains near 3.7% returns and near 7.4% in the enhanced funds in February were nearly taken back in March. Spreads upon which the arbitrage strategy depend remained tight in the first quarter, the report noted, averaging 3% to 6% “with little perceived risk,” an investor letter reviewed by ValueWalk said.
The portfolio de-emphasized low yield simple spreads, focusing instead on complex deal structures, competitive bids, hostile takeovers, spin-offs,...
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