Editing Hedge fund (section)

===Event-driven===
{{Main|Event-driven investing}}
Event-driven strategies concern situations in which the underlying investment opportunity and risk are associated with an event.<ref>{{cite book |title=Absolute Returns: the risks and opportunities of hedge fund investing |first=Alexander |last=Ineichen |year=2002 |publisher=John Wiley & Sons |isbn=978-0-471-25120-0 |page=[https://archive.org/details/absolutereturnsr0000inei/page/182 182] |url=https://archive.org/details/absolutereturnsr0000inei/page/182 }}</ref> An event-driven investment strategy finds investment opportunities in corporate transactional events such as consolidations, [[acquisitions]], [[recapitalization]]s, [[Bankruptcy|bankruptcies]], and [[liquidation]]s. Managers employing such a strategy capitalize on [[valuation (finance)|valuation]] inconsistencies in the market before or after such events, and take a position based on the predicted movement of the [[Security (finance)|security]] or securities in question. Large [[institutional investor]]s such as hedge funds are more likely to pursue event-driven investing strategies than traditional equity investors because they have the expertise and resources to analyze corporate transactional events for investment opportunities.<ref name=Bartolo/><ref>{{Cite news|url=https://pugvestor.com/ways-invest-money-stocks/|title=Different ways to invest money in stocks |date=30 March 2017|work=Pugvestor|access-date=14 April 2017|language=en-US|archive-url=https://web.archive.org/web/20180109045554/https://pugvestor.com/ways-invest-money-stocks/|archive-date=9 January 2018|url-status=dead|df=dmy-all}}</ref><ref name=Event-Driven>{{cite web |url=http://www.barclayhedge.com/research/educational-articles/hedge-fund-strategy-definition/hedge-fund-strategy-event-driven.html |title=Understanding Event-Driven Investing |publisher=BarclayHedge Ltd. |access-date=17 March 2011 |archive-url=https://web.archive.org/web/20101230081550/http://www.barclayhedge.com/research/educational-articles/hedge-fund-strategy-definition/hedge-fund-strategy-event-driven.html |archive-date=30 December 2010 |url-status=dead |df=dmy-all }}</ref>

Corporate transactional events generally fit into three categories: [[distressed securities]], [[risk arbitrage]], and [[special situation]]s.<ref name=Bartolo/> [[Distressed securities]] include such events as restructurings, [[recapitalization]]s, and [[Bankruptcy|bankruptcies]].<ref name=Bartolo/> A distressed securities investment strategy involves investing in the bonds or loans of companies facing bankruptcy or severe financial distress, when these [[bond (finance)|bond]]s or [[loan]]s are being traded at a [[discounts and allowances|discount]] to their value. Hedge fund managers pursuing the distressed debt investment strategy aim to capitalize on depressed bond prices. Hedge funds purchasing distressed debt may prevent those companies from going bankrupt, as such an acquisition deters [[foreclosure]] by banks.<ref name=Coggan/> While event-driven investing, in general, tends to thrive during a [[bull market]], distressed investing works best during a [[bear market]].<ref name=Event-Driven/>

[[Risk arbitrage]] or [[merger arbitrage]] includes such events as [[Mergers and acquisitions|mergers]], acquisitions, liquidations, and [[hostile takeover]]s.<ref name=Bartolo/> Risk arbitrage typically involves buying and selling the stocks of two or more merging companies to take advantage of market discrepancies between acquisition price and stock price. The risk element arises from the possibility that the merger or acquisition will not go ahead as planned; hedge fund managers will use research and analysis to determine if the event will take place.<ref name=Event-Driven/><ref>{{cite web |url=http://www.barclayhedge.com/research/educational-articles/hedge-fund-strategy-definition/hedge-fund-strategy-merger-arbitrage.html |title=Understanding Merger Arbitrage |publisher=BarclayHedge Ltd. |access-date=17 March 2011 |archive-url=https://web.archive.org/web/20110315111628/http://www.barclayhedge.com/research/educational-articles/hedge-fund-strategy-definition/hedge-fund-strategy-merger-arbitrage.html |archive-date=15 March 2011 |url-status=live |df=dmy-all }}</ref>

Special situations are events that impact the value of a company's stock, including the [[restructuring]] of a company or corporate transactions including [[Corporate spin-off|spin-off]]s, share [[Share repurchase|buy backs]], security issuance/repurchase, asset sales, or other catalyst-oriented situations. To take advantage of special situations the hedge fund manager must identify an upcoming event that will increase or decrease the value of the company's equity and equity-related instruments.<ref name="Strategy Definitions">{{cite web |url=http://www.hedgefundresearch.com/index.php?fuse=indices-str#2703 |title=HFR I Strategy Definitions |publisher=Hedge Fund Research Inc. |access-date=17 March 2011 |archive-url=https://web.archive.org/web/20110720022439/http://www.hedgefundresearch.com/index.php?fuse=indices-str#2703 |archive-date=20 July 2011 |url-status=live |df=dmy-all }}</ref>

Other event-driven strategies include credit arbitrage strategies, which focus on corporate [[fixed income]] securities; an activist strategy, where the fund takes large positions in companies and uses the ownership to participate in the management; a strategy based on predicting the final approval of new [[pharmaceutical drug]]s; and legal catalyst strategy, which specializes in companies involved in major lawsuits.