VH Standard Merger Arb Fund - Quarterly Letter (Q1 '26)
- Robert von Hoffmann
- May 19
- 2 min read
Transactions Mentioned In This Letter: None.
QUARTERLY RESULTS
There is little to say about this quarter. I sat at my desk and actively went through the deals in our portfolio, managed our risk and looked for ways to put capital to work amidst the downturn in the markets (S&P 500 returned -4.6% and the Nasdaq 100 returned -7.1% for the quarter). Although there was a lot going on around us, we had a fairly uneventful quarter. We are more like an insurance operation than a public equity strategy, so this shouldn’t be surprising to those who understand. As the saying goes, “there’s always something to do,” but that’s not how we see it. Sometimes the thing to actively do is nothing.
Our portfolio held substantial cash throughout most of the quarter due to continued deal completions, which partially explains why we were positive when many other portfolios likely were not.
During the quarter, we had a net return of +0.27%. Since inception in July of 2023, $100 invested in the fund has grown to $119.01, as of March 31. One uncorrelated position had a negative impact on what would have been a decently positive return for our overall strategy (that position has since returned a substantial portion of those unrealized losses, helping us to a positive +3.07% net return for the month of April). Below is a chart of how the fund performed YTD against the backdrop of a downturn in the S&P 500.
Going forward, I continue to look for opportunities to compound your investment over time, which I’ll comment on in the next letter if necessary. In the meantime, here are a few statistics:
Since inception, our universe of deals with a signed DMA has seen:
387 completed deals
17 failed deals
95.7% completion rate
The makeup of our historical universe since 2015 consists of:
19.4% in healthcare
18.1% in technology
12.9% in financials
The worst performing sector has ironically been consumer discretionary with a 93.5% completion rate.
The best performing sector has unsurprisingly been real estate with a 100% completion rate.
Deals with a transaction value above $50 billion have a better success rate than deals with a transaction value between $15 billion and $50 billion, although the sample size is small.
Deals with a transaction value under $1 billion provide a fertile hunting ground for us. Many larger funds can’t participate meaningfully here in the same way we can.
Deals with a transaction value under $5 billion make up 75.8% of our historical universe, providing some insight into how smaller funds have scaling advantages only up to a point. Beyond that threshold (which I estimate to be around $1 billion to $3 billion in AUM), a fund will need to start taking concentrated positions in a smaller set of opportunities.
“Great things are done by a series of small things brought together.” – Van Gogh