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An Alternatives Fund That Could Benefit From Rising Rates

Silver-rated Merger Fund's experienced team plies a proven, consistent approach to merger-arbitrage.


Tayfun Icten: The premise behind an alternative investment strategy is that it provides a unique return driver that is not dependent on market beta, or in other words, systematic risk. Liquid alternative managers look for idiosyncratic return drivers that provide a certain level of downside protection in market stress, while producing attractive risk-adjusted returns in the long run.

As an alternative to fixed income, a merger-arbitrage strategy produces a bondlike risk/return profile with low volatility. The strategy relies on an inherent risk premium embedded in merger deal spreads. This risk premium exists because there is still some chance that an announced deal may not close. Unlike most fixed-income investments, higher interest rates generally mean wider deal spreads, potentially improving strategy returns.

Tayfun Icten does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.