Arbitrage options for equity investors

EQUITIES

Kristian Falnes, manager of the SKAGEN Global fund, explains how mispricing across a company's capital structure or an industry sector can deliver gains for shareholders.

Arbitrage, the attempted risk-free exploitation of pricing inefficiencies, is a well-established hedge fund strategy, but there are also opportunities for equity investors to take advantage of market misconceptions which create pricing anomalies. Although not without risk, investing in an unpopular share class or a misclassified company can present opportunities for those with investment flexibility and a long-term horizon.     Added security Although there are often differences between countries, in general, preference shares differ from ordinary shares in that they offer investors...