Merger arbitrage was once a standard hedge fund strategy. But now AllAboutAlpha.com notes that at least two studies raise issues about the future of the strategy and all those merger arbitrage funds out there. An indicator to watch of course is the size of the deal spreads; it looks like they are in long-term decline, which may be correlated over some periods with a decline in merger fund alpha. 

The reasons include a lot of money chasing too few deals; the popularity of cash deals, which have lower spreads; and a drop in hostile transactions. But the issue is how permanent all this is. The article notes that stage might be set for a resurgence: There may be fewer hedge funds chasing deals, and hostility may return to the scene via activist investors. You never know. 

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