Hedge Funds and M&A

1. HEDGE FUNDS
AND M&A
• 756- Sumit Padhi
• 757- Pritesh Panchal
• 758- Priya Pankar
• 759- Rigan Panseria
• 760- Komal Parmar
• 761- Mahesh Parmar
• 762- Dipakkumar
Patel
• 763- Nilesh Pathak
• 764- Pratik Samria
Group No. 7

2. INTRODUCTION TO HEDGE FUNDS
• Hedge funds generally relate to an unregistered company that holds a pool
of securities and assets, and does not qualify as an investment company
under the investment company act of United States.
• A typical hedge fund is a pool investment vehicle managed privately and
subscribed by a few selected private players.
• The investors pay a performance fee to the hedge fund manager.
• Hedge funds follow unique investment style and a combination of different
investment strategies across various countries.
• Types of investments include fixed income securities, equity, currencies,
derivatives, OTC instruments, commodities and other assets.

3. HEDGE FUNDS AND M&A
• Hedge Funds form a part of private financial sponsors
who invest in Leveraged Buyout (LBO).
• There are no much restrictions on hedge funds
regarding:
1. Use of Leverage.
2. Choice of Investment.
3. Creation of absolute return for investors.
4. Very less compliance and disclosure requirements.
5. Network of rich investors who invest in large
amount.

4. HEDGE FUNDS AND M&A
• Hedge funds provide a specific set of unsecured debt to LBOs as they
comprise of:
1. A specific set of financial products in large denominations.
2. A group of investment strategies focused on absolute return creation.
3. An alterative investment class meant for investment such as LBOs.
4. Innovative business model for unsecured debt financing and investing.
• Hedge fund managers face a penalty if they are unable to generate
absolute return for their investors.

5. FEATURES
OF HEDGE
FUNDS
• High Net-Worth Investors
• Diverse Portfolio
• Higher Fees
• Higher Risks
• Taxation
• Regulations

6. DIFFERENCE BETWEEN HEDGE FUNDS &
MUTUAL FUNDS
Hedge Fund Mutual Fund
Meaning: The hedge fund is a portfolio of
investments, in which few
qualified wealthy investors pool
their money to buy assets.
A mutual fund is an investment,
where savings of several investors
are pooled together to purchase a
diversified basket of securities at
low cost.
Return: Focus on absolute returns. Focus on relative returns. Returns
should be higher than benchmark.
Investment: Can invest in any asset class –
stocks, bonds, commodities,
real estate, private
partnerships – or exotic debt
products like packaged sub-
prime mortgages.
Work within a risk controlled &
compliance framework set up by
the regulator. Hence very risky
asset classes are prohibited for
investment.

7. Hedge Fund Mutual Fund
Management: It is aggressively managed. It is less aggressively managed as
compared to Hedge Fund.
Investor Type: Investors are Pension Fund,
Endowment Fund, High Net-
worth individuals.
Most of them are Retail investors.
Regulation: There is less regulation. It is strictly regulated by SEBI.
Fees: Fees is performance based. Fees is based on percentage of
assets managed.
Transparency: Information of Hedge fund is
provided only to investors.
Annual reports are published &
semi-annual disclosure of the
performance of assets.

8. HEDGE FUND
INVESTMENT
STRATEGIES
• Tactical trading
• Macro
• Managed futures
• Relative value arbitrage
 Convertible arbitrage
 Fixed income convertible

9. HEDGE FUND
INVESTMENT
STRATEGIES
• Event-driven style
• Equity long and short style
• Funds of funds style

10. UNDERSTANDING HEDGE FUNDS
Hedge funds
are alternative
investments using
pooled funds that
employ different
strategies to
earn active return,
or alpha, for their
investors. Hedge
funds may be
aggressively managed
or make use of
derivative and
leverage in both
domestic and
international markets
with the goal of
generating
high returns
They are more
expensive as
compared to
conventional
investment
instruments
because they have
a Two And Twenty
fee structure,
meaning they
charge two percent
for asset
management and
take 20% of overall
profits as fees.
They have had an
exceptional growth
curve in the last
twenty years and
have been
associated with
several
controversies.

11. UNDERSTANDING MERGER ARBITRAGE
Merger arbitrage is an
investment strategy
whereby an investor
simultaneously
purchases the stock of
merging companies.
A merger arbitrage takes
advantage of market
inefficiencies
surrounding mergers and
acquisitions.
Merger arbitrage, also
known as risk arbitrage,
is a subset of event-
driven investing or
trading, which involves
exploiting market
inefficiencies before or
after a merger or
acquisition.
Merger arbitrage is a
strategy that focuses on
the merger event rather
than the overall
performance of the stock
market.
There are two main types
of corporate mergers—
cash and stock mergers.
In a cash merger, the
acquiring company
purchases the target
company's shares for
cash. Alternatively, a
stock-for-stock merger
involves the exchange of
the acquiring company's
stock for the target
company's stock.

12. THANK YOU