•  
• Tweet
•  
•  
•        Print
•  
•        Email
•  
•         Track Keywords

The billion-dollar club (BDC) hedge funds rose 2.5% last month compared to an average 2.2% gain in the sub-BDC range, but the latter group remains ahead YTD, up 7.6% versus a BDC gain of 6.1%.

A renewal in corporate dealmaking helped merger arbitrage advance in April to maintain the performance momentum in event-driven.

The big gains gleaned from backing Spac-structures, which boosted returns in January and February, have been less of a recent performance driver.

The two forces mean BDC event-driven funds are up 15.5% YTD, having gained 6.9% in April, their strongest month of 2021.

There is optimism that Covid-19 unlocking will fuel higher M&A and continue the strategy's strong performance; a marked turnaround from 'arb-ageddon' losses last year when spreads widened at the initial height of the pandemic.

With the possibility of rising prices replacing Covid-19 as the dominant market theme in the rest of 2021, BDC hedge funds need to rehone strategies and communicate to investors their specific approach to inflation.

Funds that can identify the beneficiaries of higher financing costs and bet against the losers will gain most, according to Franklin Templeton: "We believe these strategies are particularly interesting now as a fixed income diversifier given the potential for renewed economic growth and an uptick in inflation."