by Wolf Richter
The “arbs” got caught on the wrong side of the M&A collapse.
Hedge funds are getting bloodied in one of their favorite games, after years of a giddy boom in mergers and acquisitions with ever sillier valuations, made possible by an endless flow of easy money from yield-starved investors and fee-hungry banks, under the eyes of regulators who’d conveniently fallen asleep.
But that M&A bubble is now collapsing. And many hedge funds that were into merger arbitrage got caught on the wrong side of the bet.