Hedge fund managers are excited about the event driven space—they think there is Alpha to be made in mergers and acquisitions markets.
SkyBridge’s Troy Gayeski says his firm is investing heavily in event driven managers.
“Event driven equity has been our largest theme for quite some time,” he said, speaking on a panel this morning at the SkyBridge Alternatives Conference (SALT) in Las Vegas. “We think that is the best opportunity with upside capture with the least downside if things deteriorate for any reason,” he said.
Jacob Gottlieb of $6.5 billion hedge fund firm Visium Capital agrees.
“Event driven is an interesting space now where you can generate returns even in a volatile or uncertain market,” he said.
Gottlieb then listed some sectors he likes, and others he is avoiding.
“One theme that is going on now is the U.S. energy renaissance. There is a phenomenon where there is a spread between oil prices around the world so it is very advantageous for the U.S. to get oil and gas in the U.S. What has happened is that offshore has gotten more expensive so that has been a shift to onshore oil drilling – the high spec oil drillers on the onshore are virtually at capacity,” he said. “One company that benefits is Patterson…we think this is one company that will grow with the U.S. energy renaissance for the foreseeable future.”
Another theme he is focusing on is the semi-conductor space.
“We have a company like Freescale that is going to benefit from China’s conversion from 3G to 4G – this is a large event that is going to happen…that is something we like.”
On the other side of that theme are the handset manufactures who are seeing their costs go up and their competitive positions weaken. “That would be an area that we don’t like,” he said.
Another area he likes—both on the long and the short sides—is healthcare and biotechnology.
“The amount of value that is being added by treating disease—cancer, hepatitis, etc.—has just been tremendous, so much of this is warranted.”
However, he did add that the healthcare sector isn’t producing all good news.
“There are companies with very unproven technologies with questionable prospects that were able to go public and public equity investors were very willing and able to give them very high valuations and some of that has blown off and created short opportunities…some of these companies are not going to make it,” he said.