My tax burden was rather light in 2012 mostly because I deliberately chose not to execute any merger arbitrage trades in my portfolio. The opportunity cost of not playing some obvious low-risk events (well, obvious and low-risk for me alone) was probably significant. The risk for me of having my capital tied up in strategies I can't unwind is potentially much greater than that cost because I don't want to be caught in the middle of a major market dislocation.
Merger plays are low-risk in a stable macroeconomic environment. Our present environment is totally unstable. Its parts hold together with duct tape, bailing wire, and the prayers of a few dozen central bankers. If the market were to crash after I go long the stocks of announced acquisition targets, collapsing share prices may result in the merger's termination. I'd be stuck with outsized positions in a handful of firms outside my normal sphere of competence, at valuations much lower than whatever premium the acquirer would have paid. A merger-arb strategy in this kind of market is like picking up nickels in front of a steamroller. I'd rather leave the nickels in place than try to run ahead of the steamroller.
I also used to be a fan of using cash proceeds from option writing to add to fixed income holdings. I let the last of my bonds mature last year, and I'm staying away from dollar-denominated bonds. The risk of hyperinflation is more compelling than adding yield with a bond ladder.
I probably missed a great deal of potential gains by sitting on the sidelines this long. I have to live with this outcome. Hedge fund managers chasing yield and pension fund managers beholden to benefit payouts must also live with the extreme risks they are taking now. I believe my patience will be rewarded. I have waited a long time and I have further to wait.