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Merger Arbitrage Commentary: As at December 31, 2020

Source: Craig Chilton, CFA | Tom Savage, CFA
Publish Date: Jan 15, 2021
Read Time: 3 minutes
During the fourth quarter of 2020, our merger arbitrage funds performed well, with the Picton Mahoney Fortified Arbitrage Alternative Fund (Class F) returning 8.73% and the Picton Mahoney Fortified Arbitrage Alternative Plus Fund (Class F) returning 16.83% during the quarter.

Special Purpose Acquisition Companies (SPACs)

The SPAC strategy utilized by the funds continued to generate strong returns in Q4. The pace of business combinations (de-SPACs) continues to accelerate as private companies have embraced SPACs as a real alternative to the traditional IPO. The technology sector in general, and electric vehicles/autonomous driving in particular, have been very fruitful areas for business combination announcements. With the frenzy in the US technology market, it seems that nearly every de-SPAC announcement was met with “panic buying”, providing an opportunity to crystalize on the investment which we are more than happy to sell to and redeploy capital into new SPACs issued at par. An example of this is TPG Pace Beneficial Finance’s business combination with EVBox, Europe’s largest EV charging station operator. By the looks of the SPAC IPO calendar, January 2021 could end up surpassing 2020 in terms of SPAC issuances. If the equity market loses its sizzle, the structure of the SPAC provides comfort, in that every common share includes the right to be redeemed for its IPO price, plus interest, at the close of a business combination or at the end of the SPAC’s life (typically, within two years).

Merger Arbitrage

Merger activity picked up in the fourth quarter, alongside the strength in the equity market and the somewhat improved visibility on a potential end of the COVID-19 pandemic. Additionally, we have seen some attractive spreads emerge as our sense is that most arbitrage players are much more focused on SPACs, leaving less capital competing for traditional merger arbitrage spreads. Some large technology and pharmaceutical deals (i.e.,, Inc. buying Slack Technologies, Inc., AstraZeneca Plc buying Alexion Pharmaceuticals Inc.) emerged during the quarter.

Performance Returns Table for the Picton Mahoney Fortified Arbitrage Alternative Fund Class F and Picton Mahoney Fortified Arbitrage Alternative Plus Fund Class F

For the funds’ full performance, visit
This material has been published by Picton Mahoney Asset Management (“PMAM”) on January 11, 2021 It is provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable, however, the accuracy and/or completeness of the information is not guaranteed by PMAM, nor does PMAM assume any responsibility or liability whatsoever. All investments involve risk and may lose value.

Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Alternative mutual funds can only be purchased through a registered dealer and are available only in those jurisdictions where they may be lawfully offered for sale.

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