Investment Strategy
The Berenberg Merger Arbitrage is an equity-based absolute return fund that pursues a specialised merger arbitrage strategy. The fund aims to achieve absolute returns while protecting investors' capital by exploiting price differences arising from publicly announced mergers, acquisitions, corporate restructurings or similar transactions. The fund aims to achieve long-term capital growth and outperform the money market (as measured by the €STR).
The fund's investment strategy aims to generate attractive absolute returns, regardless of general stock market performance. Due to its historically low correlation with traditional market indices, the fund offers investors diversification within the overall portfolio. Through broadly diversified investments in various M&A transactions, sectors and regions, the fund aims to achieve a stable risk/return profile with low volatility. The investment strategy aims to exploit inefficiencies in the pricing of company acquisitions and mergers and is based on the difference between the market price of a target company and the announced acquisition price.
Further details on the opportunities and risks of this fund can be found in the sales prospectus.
Monthly market comment
At the end of the month, the Berenberg Merger Arbitrage Fund was fully invested across 50 positions: 55% Europe, 38% North America, and 7% APAC. The largest setback in an otherwise active M&A month with numerous new investments was Integrum – an extraordinary deal break that cost 65 basis points. The simultaneous occurrence of two extremely unlikely events (<1:500) was unprecedented in our 15 years of M&A experience: the buyer unexpectedly withdrew due to an administrative-technical error by the founder, despite all other conditions being met. The loss is expected to be offset within a few weeks in the opportunity-rich portfolio, and we foresee no implications for the broader M&A environment. Additional temporary volatility came from Covestro, a core position where opportunistic purchases were made. Since the fund’s launch in mid-May, the summer months were moderate – following a strong start to the year in the merger arbitrage space. Currently, all key success factors for the now fully invested strategy – as seen from 2018 to 2022 – are in place again, and year-end is expected to bring a dynamic finish with numerous deal closings.
Portfolio Management
