M&A lull poses challenge for event driven equity funds

Economic uncertainty stemming from the eurozone debt crisis and a perceived weak recovery in the US put the brakes on deal activity in the second half of 2011, squeezing the returns of event driven equity funds that rely on a steady flow of mergers and acquisitions (M&A) to drive returns.

Despite a promising start to 2011, merger arbitrage funds finished the year with an average loss of around 2%, according to data from Hedge Fund Research. The strategy endured a torrid third quarter, when