Betting on the outcome of mergers has produced mixed fortunes for hedge fund managers. Last year, managers betting on outcomes of M&A recorded their worst performance for at least five years. This year, however, although there are fewer deals, merger arbitrage is set for its best year since 2004.

Funds betting on M&A were up 7.3% by the end of June, according to data provider Hedge Fund Research, which began publishing the performance of the strategy in 2004. By the middle of last year, it was flat. Merger arbitrage, which at its simplest involves buying shares in acquisition targets and selling short the acquirers, is up despite lower activity.