CFA Level I · CFA Level I Exam · Hedge Funds
A hedge fund manager buys a company's convertible bonds ahead of a announced spin-off, expecting the separation to unlock value. This approach is most likely classified as:
The approach is most likely an event-driven strategy. Event-driven managers take positions to profit from corporate events such as spin-offs, mergers, restructurings or bankruptcies, rather than from relative pricing gaps or broad macroeconomic trends.
- Arelative value fixed-income arbitrage
- Ban event-driven strategyCorrect
- Ca systematic macro strategy
Explanation
Positioning for value created by a corporate event such as a spin-off is event-driven investing. Relative value arbitrage exploits price gaps between related securities, and systematic macro uses rules-based models on macro factors.
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