UBS O’Connor, the hedge-fund unit of UBS Asset Management, is making a $4 billion bet on the revival of the merger-arbitrage market.

This market has faced challenges this year due to regulatory hurdles impacting major deals. Despite the tough environment, UBS O’Connor remains optimistic about potential improvements in the coming months.

The firm has maintained a substantial commitment to merger-arb strategies, keeping a third of its portfolio allocated to this area over the past couple of years. This strategic positioning reflects a belief in the eventual recovery of merger-arbitrage opportunities, as investors speculate on the likelihood of proposed mergers and acquisitions successfully closing.