The market has shifted in a way most fund managers have not yet processed. Alpha has become harder to find because the world that created easy returns no longer exists. The era of zero interest rates is over, and higher rates have changed the behavior of companies and shareholders’ expectations. Passive flows and artificial intelligence, which trades noise faster than any human, have stifled traditional sources of advantage. While the industry searches for signals in crowded places, the most interesting opportunities are quietly emerging in the background.
Event-driven catalysts are beginning to reappear. You can see it in the way boards are being challenged, capital allocation is being questioned, and companies are being pushed to act again. This is where structural alpha comes back into focus. It does not rely on forecasts or momentum. It comes from understanding the internal pressure points that force companies to make decisions and from recognizing when those decisions are about to change the value of a business. This is the area my company, The Edge, studies every day.
How Higher Rates Revived Corporate Pressure
Higher rates have restored the one ingredient the market has lacked for more than a decade. Pressure. When capital carried no cost, companies could postpone decisions indefinitely. Inefficient structures survived. Weak management teams hid behind cheap refinancing. Boards drifted from their responsibilities because the environment allowed it. Tighter financial conditions are now exposing weak balance sheets and forcing leadership teams to confront the realities they avoided for years.
The business cycle has restarted after a long period of artificial calm. You can already see the early signs in the rise of breakups, refinancing, restructurings, bankruptcies, and spin-offs. These are not random events. They are the direct result of a market that has finally turned the cost of capital into a filter again. The market is pressuring companies lacking discipline to simplify their operations. Boards that disregarded alignment are facing pressure to clarify their actions. Management teams that relied on narrative are being forced back into execution.
This is precisely the environment that creates event-driven opportunity. Pressure forces catalysts. Catalysts force action. Action changes value. For investors who understand the structural mechanics behind these shifts, this market offers a chance to capture the type of alpha that simply did not exist during the long zero-rate era. This is where we have always focused our attention, because corporate change tends to appear before the market is prepared to recognize it.
The Return Of Structural Alpha
For years, structural alpha has been evident, but the market’s noise has kept most investors from recognizing it. In my previous Forbes work, I have written repeatedly about why breakups create value and why spinoffs quietly outperform. I have shown how corporate events are consistently misunderstood, why earnings season no longer moves stocks in the way people expect, and why structural alpha has begun to make a quiet comeback. These ideas were never theories. These signals indicated the market’s underlying shifts long before the headlines caught up.
Structural alpha is the return stream that comes from corporate change rather than market direction. It is created when companies are forced to make decisions that alter the economics of the business. A breakup exposes the true performance of each part. A spinoff enables a high-quality division to function independently, previously restricted by a slower parent company. A refinancing forces discipline. A leadership change resets incentives. These events change valuation because they change reality, not because the market feels optimistic. That distinction matters.
Artificial intelligence cannot see this. It can analyze data, but it cannot interpret a boardroom. It cannot judge the credibility of a leadership team under pressure. It cannot understand the politics behind a separation or the timing behind an internal review. Fund managers who rely solely on screens and factors will miss what is driving value in this environment. Structural alpha is not captured by algorithms. It is captured by understanding human behavior inside companies and recognizing when those signals change.
This area is where The Edge has spent its time. We examine companies from an internal perspective, rather than from an external one. That perspective becomes invaluable when the market shifts from momentum to catalysts and from forecasts to actions.
The Catalyst Cycle Is Turning
The catalyst cycle is not something that may appear in the future. It is already here. The Mercer Higher for Longer study shows a clear rise in default rates and highlights why event-driven strategies tend to produce stronger returns in high-rate environments. The cost of capital has become a filter again, and companies that stretched their balance sheets during the easy money period are now being forced into decisions they avoided for years.
The data clearly demonstrates this pressure. Activism is on the rise in markets around the world, thanks to campaigns like Elliott’s pressure on Salesforce, Ancora’s efforts at Norfolk Southern, the board challenge at Disney and even our in-house campaign against Dine Brands Inc. Shareholders are calling for responsibility and restructuring in ways they didn’t during the time of zero rates. Furthermore, mergers and acquisitions are coming back. The growing gap in mergers, such as Adobe and Figma before they ended, Exxon and Pioneer before they got approval, and Capital One and Discover, shows that investors are finding clearer ways to make profits when the market misjudges risks related to regulations or execution.
As refinancing opportunities close, distressed cycles are also starting up again. You can see that companies like WeWork, Rite Aid, and Yellow had to act quickly because their balance sheets were shattered. The same thing is happening to smaller companies that are overly leveraged and are now being driven to restructure, sell off assets, or file for bankruptcy protection.
These changes are not one-time things. They show that the business world is changing. Businesses are restructuring because they have no other choice. Boards are under pressure because they can’t hide governance failures anymore. The result is the environment where catalysts concentrate and where event-driven investors find the gaps others overlook. Management teams are being forced to confront business models that no longer work in a world where capital demands justification.
Corporate actions are the fuel of event-driven returns. They create valuation gaps, information imbalances, and moments where markets react slower than the underlying decision. Catalysts alter value swiftly and frequently, often ahead of investors’ readiness. This is the environment The Edge has been anticipating because catalysts do not appear by chance. They appear when conditions force companies to act, and those conditions are now firmly in place.
Why Fund Managers Must Pay Attention
Many fund managers are still operating with a mindset shaped by the last decade. They built their processes in a world where money was free, dispersion was low, and returns came from riding the same trends as everyone else. That world is not coming back. Higher rates have changed the mechanics of markets, yet most managers continue to run strategies designed for a low-rate era. It shows in performance. It shows in risk-taking. It shows in the reluctance to step outside the comfortable range of the benchmark.
Benchmarks and artificial intelligence now compress traditional alpha. Passive funds dominate flows and narrow the opportunity set. The more crowded the styles become, the harder it is for any individual manager to generate returns that look different from the index. Dispersion falls, volatility rises, and any advantage rooted in habitual factor exposure disappears. The market has become adept at rewarding the average, which is exactly why the average manager is struggling.
Earnings momentum no longer drives returns the way it once did. Guidance is often ignored. Macro noise overwhelms micro signals. Factors fire more often than fundamentals. In this kind of environment, the only remaining edge lies in the catalysts the market has not priced. These catalysts include structural change, leadership decisions, balance sheet pressure, asset sales, separations, and governance resets. These are the events that create valuation gaps large enough for managers to build performance around.
Event-driven strategies allow fund managers to escape benchmark gravity. They create opportunities that do not depend on the direction of the market or the mood of the crowd. The managers who adopt this thinking will set themselves apart. The ones who ignore it will watch competitors pull ahead by focusing on the one area where alpha still exists. This trend is why The Edge has centered its work on catalysts rather than predictions. The shift is underway, and the gap between those who see it and those who don’t is widening.
The Alpha Edge And The Human Factor
The best opportunities I have seen in decades are coming from breakups, activism, restructurings, and misunderstood catalysts. These situations often appear messy on the surface, but the mechanics underneath are what drive real value. When companies are pushed to act, the market struggles to price the outcome because it does not understand the internal forces shaping the decision. That gap between perception and reality is where structural alpha lives, and it is where The Edge has spent its time.
Event-driven investing rewards investors who can read corporate intent, understand governance dynamics, and recognize when an internal decision is about to shape future value. Operator insight matters. Board composition matters. Leadership credibility matters. These are the elements that determine whether a catalyst creates value or destroys it. They are also the elements that machines cannot understand. Artificial intelligence can process data, but it cannot interpret the tension in a boardroom, the confidence of a management team under pressure, or the psychology behind a breakup. These are human judgments, shaped by experience rather than code.
The Edge specializes in these inefficiencies. We analyze companies from the inside out and focus on the structural forces that shape outcomes. We look at catalysts before they become obvious and at decisions before the market knows they are coming. In a market where traditional alpha has faded, this human factor has become one of the few remaining advantages. Understanding behavior, intent, and structure is what separates noise from opportunity. It also defines the next generation of event-driven investing.
The Alpha Gap That Will Define The Next Decade
Market structure has changed in a way that many fund managers have not yet accepted. Catalysts are rising across balance sheets, boardrooms, and business models, and the investors who understand them are stepping into a completely unique opportunity set. Event-driven investing is no longer a niche corner of the market. It has become one of the few reliable sources of alpha in an environment shaped by higher rates and greater accountability.
The managers who lean into this shift now will define the next decade of alpha. They will operate in parts of the market where human judgment still matters and where AI cannot compete. Those who ignore it will remain trapped in benchmark gravity, competing with machines on grounds they cannot win. The shift is already here. The only question is who chooses to act on it.