SocGen Exits U.S. Merger Arbitrage

Societe Generale reportedly fired a four-member merger arbitrage trading team based in New York last month.

The move is an apparent response to declining merger activity, according to Bloomberg News. Other players such as hedge funds Deephaven Capital Management and Tisbury Capital Management shut their U.S. merger arbitrage strategies this year as well.

Unnamed sources told Bloomberg the group had invested SocGen's own capital and was breaking even since the beginning of the year. The team was led by managing director William Kavaler, who headed U.S. risk arbitrage at Commerzbank and previously worked at Laterman & Co.

Paris-based SocGen didn't comment for Bloomberg's story, which the newswire attributed to two people with knowledge of the decision.

Bloomberg data show the value of public companies taken over worldwide fell 39 percent in the first half of this year compared with a year earlier, to $644 billion. Data from Hedge Fund Research show merger arbitrage funds lost 0.4 percent on average in the first half.

Besides reduced activity, during the past year several high-profile pending takeovers either were consummated at much lower levels than first proposed, or were abandoned altogether. Arbitrage traders who bought shares of such companies as Sallie Mae, Alliance Data Systems or United Rentals when those takeovers were announced would have suffered big losses when the deals collapsed.