Mellon introduces risk arbitrage fund

Mellon Financial Corporation, the Pittsburgh-based financial institution, has added a global merger arbitrage fund to its Mellon HBV Alternative Strategies subsidiary.The new fund will focus on investing in a diversified portfolio of global risk arbitrage investments, and look to attain risk-adjusted returns of two or three times the average three-month Treasury bill rate.

The fund, which will be led by Cristina Suarez in New York and Daniel Harley in London, has so far raised $41 million, mainly from institutional investors. Mellon HBV has over $520 million of assets under management invested in five disciplines: US risk arbitrage, European risk arbitrage, hedged distressed investing, multi-strategy investing and global risk arbitrage.

A spokesman for the firm said the global focus will allow the fund to capitalise on opportunities outside the US and Europe, both of which have seen a recent downturn in merger and acquisition volumes. Two areas currently offering good opportunities are Australia and Japan, he added.

Public company consolidations have accelerated worldwide due to technological and regulatory changes, and globalisation. According to Mergerstat and Dealogic, leading providers of US and international merger and acquisition information, the annual value of announced mergers increased by more than 580% between 1993 and the end of 2001, despite slowing since mid-2000.