Hedge fund managers are gathering private information from their alumni networks and using that trading edge ahead of merger announcements, a study found. Managers of hedge funds who are connected to directors of companies engaged in mergers increase their call option holdings on targets before the deals are announced, according to a paper from the Energy Market Authority’s Harvey Cheong, University of Hawaii professors Joon Ho Kim and Harold Spilker, and professor Florian Münkel from Canada’s Saint Mary's University. An increased holding of bullish options to buy a company’s shares at a set price stands to be highly profitable, as merger announcements tend to prompt a rise in the target’s stock.