Balyasny, Schonfeld Cut Merger Arb Traders After Bad Bets

(Bloomberg) -- Balyasny Asset Management and Schonfeld Strategic Advisors are parting ways with some of their traders specializing in mergers and acquisitions, people familiar with the matter said, amid ongoing challenges in the global dealmaking environment.

Chicago-based Balyasny is closing a merger arbitrage team led by Adam Schwartz, who is leaving the firm, the people said, asking not to be identified discussing confidential information. Meanwhile, New York-based Schonfeld has parted ways with portfolio manager Eric Fritz, who ran merger arbitrage investments in the US, according to the people.

Schwartz and Fritz are departing following underperformance in their portfolios, the people said. 

Merger arbitrage and event-driven traders specialize in making bets on likely and announced M&A situations, looking to benefit on share price moves around these transactions. Eking out gains from these strategies has been harder this year amid the sluggish pace of dealmaking and ongoing regulatory intervention on larger mergers. 

While deal volumes are up around 14% at the midway point of 2024, they still lag the 10-year average for a first half by more than $300 billion, Bloomberg-compiled data show. 

Balyasny continues to run a number of other merger arbitrage teams and is growing the broader business, one of the people said. Merger arbitrage also remains an important strategy for Schonfeld, another person said. Representatives for Balyasny and Schonfeld declined to comment, as did Schwartz. Fritz couldn’t be reached for comment.

This year, the US Federal Trade Commission has sued to challenge Tapestry Inc.’s tie-up with Capri Holdings Ltd. and political opposition to the takeover of US Steel Corp. by Nippon Steel Corp. has left that deal in limbo. More recently, deal stocks including Cerevel Therapeutics Holdings Inc. and DS Smith Plc also saw intense price action swings as traders switched up positions.

The Bloomberg Merger Arb Index is up 0.42% this year, making it the worst performing group among peers in event-driven strategies. 

(Updates with detail on departures, M&A volumes from third paragraph.)

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