Merger arbitrage specialists always like a vigorous deal market, and this year they have not been disappointed. Global M&A activity through August jumped to $1.3 trillion from $922 billion for the same period in 2003, according to Thomson Financial. The number of announced deals rose from 19,822 in the first eight months of 2003 to 20,552 through August of this year. Yet the average merger arb fund was flat through August — a mere 19 basis points better than the Standard & Poor's 500 index and some 54 basis points behind Hen-nessee Group's broad hedge fund index. The poor performance extends a three-year drought for M&A arbitrage. From 2001 through 2003, Hennessee reports, merger funds appreciated at an annualized rate of just 4.2 percent. This year through August, M&A ranked 15 out of 23 in performance in Hennessee's hedge fund sectors, a scant improvement over 2003's 18 out of 23.
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