Event-Driven Hedge Fund Strategy: Merger Arbitrage

In the context of hedge fund strategies, event-driven investment strategies focus on the specific events that can affect the value of a company. These strategies seek to capitalize on inefficiencies that arise around corporate events such as mergers, acquisitions, restructurings, or other significant corporate changes. Understanding the characteristics and typical targets of these strategies can be crucial for investors looking to gain an edge in the market.

Consider the following scenario: Hedge Fund ABC employs an event-driven strategy primarily focused on merger arbitrage. They analyze potential mergers and acquisitions to identify opportunities where the stock price of the target company is likely to rise after the announcement of the deal.

Which of the following statements most accurately describes the objective of Hedge Fund ABC in this scenario?