Risk Arbitrage: Less Glam and, Yes, More Practical Than You'd Think

Editor's note: With this column, we introduce David Brail, the president and portfolio manager of Palestra Capital LLC, a Manhattan-based hedge fund that focuses on risk arbitrage. Before founding Palestra, he was director of research at Dickstein Partners for eight years. He has served on the board of directors of Amerihost Properties and on the creditors' committees for Interco, First Republic Bank and Gaylord Container, among others. As always, tell us what you think.

---

More than any other Wall Street occupation, the risk arbitrager has become, in the public's eye, the ultimate expression of high-rolling, amoral criminality. And who can blame them? Ivan Boesky, reportedly the basis for the Gordon Gekko character in the Oscar-winning movie Wall Street, and the Nobel Prize winners whose formulas led Long Term Capital Management to its rise -- and ultimate fall -- make investment bankers look like accountants by comparison! And even the fact that both former Treasury Secretary Robert Rubin and Bear Stearns Chairman Ace Greenberg cut their teeth as arbitragers hasn't helped.

But let's be honest: Gordon Gekko was no arbitrager. First of all, no arb dresses that well. Second, what we do is not nearly as exciting. ...