Arb risk

Merger arbitrage hedge funds had quite a couple of years thanks to a record number of deals. But now it appears their run may be coming to an end. Stock and credit market turmoil has roiled mergers and buyouts. Spreads between the prices offered by acquirers and their targets’ public share prices have widened sharply over the past month. This can cause serious problems for merger arb funds, which typically bet on those prices converging. Closing deals has recently gotten much harder. Sallie Mae,...