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Breakingviews: Megadeal arbitragedy

Thursday, October 16, 2014 - 04:04

Doubts over the AbbVie/Shire takeover have hurt some hedge funds. The biggest deals often come with the worst political and regulatory pitfalls, says Reuters Breakingviews’ Quentin Webb.

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We'll bring views actually Clinton went from wearing these tomorrow with a new way today for the -- -- tragedy is this way and he says to expect. Straight exactly what it is. I mean I guess you'll -- looking at. The value of my drug charge lewis' value -- and I guess so orchestra. When you found. Well I guess the point -- -- -- make in the story is to actually has been very bad few years for the measure arbitrage strategy which is applying. I'm -- usually in the target company and -- selling actual shares in the acquire. And the expectation to deal places on the scene tradition is while low risks dusting by hedge fund. Standard tenacity is just to do was -- and analyzing the risks of the particular regulates it doesn't -- dale or takes a bit longer than. Expected to close but it in fact it's -- pretty dismal in the last few years we'll just run us rosters some of the numbers is well sad results. So there to various indexes you know it's not -- it's -- they capsule all of the storybook for example Credit Suisse has these hedge fund indexes which say that. Over the lost point here is if you -- invested in we scoff but try she'd have made a 40%. Return whereas the S&P 500 has run up a 107. Percent from the same parents that's pretty. Sort of hard to explain I would've thought here and the investors in the loss here it's about one point 5% return against 20% for the wider American indexes. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Concrete reasons for things to change over the prospects in -- -- well I think there's been a few things one is that up until this year I mean not many. Sort of decent sized deals to invest and has been -- -- Steve opportunities. I'm not as men as -- re being too much money is chasing his attentions -- the spreads the difference between the price at which you can buy. The stock in the price at which the deal would close -- has gone battle so -- see the kind of potential returns even from deals that goes as -- have come down and panel talk about you have to think about lease deals that have gone. Longing for -- on predictable reasons might be saudis to actually. The problem is is the biggest deals like Ambien -- that is tracked them nice kind of heat. From regulators and politicians. They use our -- is the very hard for kind of financial analysts to kind of correctly and the -- against say. An example a few years ago it was and B sky B where. And if you remember but the bid from news cold winds and torpedoed by the phone hacking scandals -- and not with some in the court a lot of people. Short this is an even bigger story here so you have someone like John Paulson whose hedge funds. United did did the value of its stake in China is on land and in value something like 400 million parents have the last two days so what justices -- but what what where does this send. Guerin to we -- we just -- -- -- projects have euthanized funds in the future. I I -- I mean it's a good question is now I mean I think it's a question of the wider hedge fund industry there are spending time that you say a lot of the performance is being. Disappointing and -- doesn't merit the kind of -- twenty fee structure IE 18% of what -- -- in 20% of the kind of performance. And it certainly seems to me difficult to justify returns to the united a fraction of what he had just by buying the index some would argue of course that perhaps you're taking. Risks but when you see big deals like this fully it's hard to argue this is a low risk proxy targets. Thank you very much indeed -- alum albeit tragedy. Is that the word of the day. I'm you what do you Russia trophies and some confetti London time IMAX.

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Breakingviews: Megadeal arbitragedy

Thursday, October 16, 2014 - 04:04