The investment strategies utilized by hedge funds often vary, and event-driven funds are proving their methods are more effective than others. In 2013, these firms are driving growth in the industry, and investors are lining-up to infuse capital into event-driven portfolios. Those employed or seeking opportunities at hedge funds need to understand the variations of this strategy.
Event-Driven Investing
24/7 Wall Street reports that firms using a broad-based event-driven strategy look for any item that can alter the financial markets. Whether it is a political crisis, bankruptcy or social upheaval, if the event can change the price of securities, hedge funds react quickly to leverage market fluctuations. Distressed event-driven strategies target struggling entities or securities, and the event-driven multi-strategy provides wide trading discretion for fund managers. Each of these approaches is proving effective at outperforming alternative strategies.
Efficient Portfolio Management
In order to be successful at applying event-driven strategies, information systems need to relay pertinent data quickly. Firms investing in the right technology can read the market faster and make lucrative trades before competitors. As the breadth of information on the Internet becomes larger, quality assurance and system optimization are becoming more important. Event-driven strategies are changing the way in which information is processed and interpreted in the hedge fund industry. Those able to decipher the meaning of current events have an edge, which ultimately leads to higher returns and more capital from investors.
According to 24/7 Wall Street, the first-half of 2013 returns for event-driven strategies were:
- Distressed: 9 percent
- Broad-based: 8.6 percent
- Multi-strategy: 8.5 percent
Impact on Job Prospects
It is natural for talent to levitate to successful hedge funds, which makes learning the nuances of event-driven strategies prudent. For job seekers, resumes and cover letters need to showcase skills relevant to industry leading firms. Candidates are wise to show a good grasp of current politics, distressed assets and underperforming stocks during interviews. An extensive knowledge of trading methods is also important for firms utilizing an event-driven multi-strategy. For those looking to outperform and have lucrative careers, having event-driven skills is critical.
Successful hedge funds use quick reaction times to capitalize on current news and economic trends. Their reactive strategies allow them to detect subtle changes in the market and stay ahead of the competition. Job seekers are wise to learn event-driven methods and adjust their resumes accordingly.
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