We’re not going to talk about any positions in this letter, but we want to talk a bit about taking a long-term approach to merger arbitrage.
Patience is a virtue because it requires enduring some type of delay. We believe what matters most is how your actions may change, as a result of waiting. For us, having a concrete strategy in merger arbitrage that acts as our North Star during these periods keeps us focused, and over my 8 years of professional experience, I’ve added a few techniques to my arsenal to help navigate short term pressures, whether it be bias from unrealized gains or losses, competition with other managers, or other unnecessary demands that only cloud the mind of the portfolio manager. The importance of having a North Star is above all else; you need to know where you’re going, so that you never stray off course. As Victor Hugo once famously noted, “change your opinions, keep your principles; change your leaves, keep intact your roots.” It’s a slight variation on what he meant, but we look to keep intact our strategy, while constantly reassessing our risks.
This is us taking a long-term approach to merger arbitrage.
Our structure allows us this advantage. Even though we are miniscule in size, we are not beholden to any short-term thinking with M&A transactions, which are inherently short-term in nature. There’s no multi-manager (“pods”) structure, so we can take exposure to longer term investments. We’re actively managing our risk, so there will be no tap on the shoulder tomorrow telling us to liquidate. We’re basically unlevered, so we don’t worry about additional forced selling from volatility and leverage. Our only focus remains on analyzing all investments in M&A transactions through the lens of “insuring” those transactions. The selling shareholders (who we buy from) get their compensation from our purchase. In return, we get the spread left. If that transaction fails, we take the loss, and then we most likely hand those shares back to the original selling shareholders (who we bought from). It’s a very simple strategy, although not easy to implement, and we remain committed to keeping it that way.
We hope that resonates with you, as our investors.
If you’d like to have a conversation, please feel free to reach out.
“Great things are done by a series of small things brought together.” – Van Gogh
Disclosures
This Presentation (the “Presentation”) is for informational purposes only and is intended solely for the persons receiving it; any reproduction or distribution is prohibited. This document does not constitute an offer of securities. Such an offer may only be made by means of a private placement memorandum. The information contained in this summary is not complete and is qualified in its entirety by the reference to the more detailed information contained in the Confidential Private Placement Memorandum of the Fund. An investment in the Fund subject to a variety of risks and is speculative. There is no assurance that the Fund will achieve its investment objectives. Prior performance is no guarantee of future returns.
All information provided in the presentation are as of May 31, 2024, unless stated otherwise.
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