Last year, hedge fund investors, poured USD 31bn into activists and other event-driven funds, aiming for huge profits. However investors now fear the sector will be hurt this year by the credit crunch, private equity retrenchment and minimal stock market hedging. Notable poor performance from many hedge funds, including, New York activist Pardus Capital, and the decision by Deephaven Capital, to close its $780m Event funds has acted as a catalyst on the rethink.

Event-driven funds adopt strategies that are divided into two broad approaches, and both have been hurt by the credit crunch and stock market problems. The first involves buying "value" stocks discarded by other investors, but where they expect or - in the case of activists - create a catalyst to push up the shares. These would be the shares worst hit during a stock market rout and a flight to quality. The second strategy is merger arbitrage, betting on whether deals will complete. With the credit crunch, many deals were abandoned last year, and the gap between share prices and the bid value soared, hurting re-turns.  

Just as there are no little people or unimportant lives, there is no insignificant work.