VH Standard Merger Arb Fund - Quarterly Letter (Q3 '25)

VH Standard AM - Quarterly Letter (9-25).pdf

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Transactions Mentioned In This Letter: None.

QUARTERLY RESULTS

For the 3rd quarter, we had net returns of +5.77%, bringing our year-to-date net returns to +13.33%, as of September 30. This has been a good year for investing in our merger arbitrage strategy, relative to our long-term target of a 3%-5% spread over the risk-free rate. There are some obvious drivers of these returns, in our opinion, with a current economic framework effectively shifting toward deregulation and a generally buoyant M&A environment. Both are positive tailwinds for our portfolio. Additionally, there may have been a few internal drivers in our portfolio mix that have led to outperformance, as the HFRI ED Merger Arbitrage Index is up +8.22% year-to-date as of September 30, 2025, compared to our +13.33%.

That said, I believe that I have developed a differentiated approach over the first decade of my career, so it makes sense that we would end up with results not entirely in line with the HFRI ED Merger Arbitrage Index. In a way, we grew differently purely out of necessity. While we’re small and can maneuver far more nimbly than the larger firms, there are some scale disadvantages that we had to address. We don’t get the best pricing on leverage, so I decided to go without it. There’s no team yet behind me on managing the portfolio day-to-day, so I’ve found other ways to scrape together resources and develop workflows that make me more efficient. Research doesn’t find its way to me; I have to do it myself. These are all elements that are different from most hedge funds - we aren’t resource-heavy to begin with, but I think we’re developing an interesting mix here because of that.

I’ve said this before, I believe our strategy to be more akin to operating an insurance company than it is to investing in a typical long/short, event-driven hedge fund. I’ve been developing this perspective over my career and believe more and more in its usefulness.

In similar respects to a proper insurance company, our goal is to grow the book value of your investment over the long term. On that note, we’ve grown book value per $100 to $117.17 (annualized at approx. +7.4%) since inception. While others may be looking for quick returns, I’m looking to compound our value over a very long period of time.

TABLE OF REALIZED PROFIT AND LOSS BY QUARTER

One of my favorite metrics to measure our success is the realized gains vs realized losses. It’s somewhat similar to a combined ratio view for insurance companies. It should be noted that changes in the AUM impact this a little bit with the timing of investments vs when realized returns happen, so it’s not perfect, but it’s an important view towards the impact of our mistakes. Below is a chart of our unaudited realized gains and losses - for those wondering, the fund is currently holding a profit in the unrealized P&L category, as of September 30, 2025.

Disclaimer: The chart above shows the total cumulative realized net profits or net losses in the VH Standard Merger Arb Fund for each quarter since inception on July 11, 2023 until September 30, 2025. Fluctuations in size of P&L can be affected by changes in the assets under management, and you should refer to the performance table on Page 1 of this report for actual results of the fund.

I share this information because I believe it shows a slightly different story from the actual performance of the fund, which considers both realized and unrealized profits and losses. The story I see here is one that is stable and progressively growing over time, due to both AUM growth and compounding of investor book value. To me, it’s an illustrative picture of our approach to managing risk. There can be a delayed reaction in investing, where your results don’t show up on the day you made an investment; they show up down the road. I think this piece of information gives you a little insight into how our investments have performed with somewhat of a view.

What I particularly love about our strategy is that at any time, someone can invest in our operation (the hedge fund part) without diluting any of us as investors or requiring anyone to sell their stake. In that sense, we’re a perfectly scalable “business.” I don’t see this scalability changing until we’re significantly larger, to the tune of hundreds of millions in AUM. On the flip side, if anyone wants to sell their stake, they don’t need a buyer - we offer monthly liquidity at book value for that. And if anyone wants to increase their position, they can do so as easily as possible without complications - there are no partners to discuss the change with.

I hope to grow both the size of the business, while growing your book value per $100 invested at the same time. Both are important, but growing your book value per $100 invested is the measure of value provided to you as investors; however, I also believe growing the size of the business will help provide more value to you from the benefits of scale.

In the 4th quarter 2025 letter, I hope to give you some insight on where I see the 2026 M&A landscape and beyond, including some data on 2025 activity both at the fund and in our universe of deals.

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

Please see the attached document for more details about our portfolio and fund, and all disclaimers.