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Merger Arbitrage Commentary: As at September 30, 2020

Source: Craig Chilton, CFA | Tom Savage, CFA
Publish Date: Oct 21, 2020
Read Time: 3 minutes
The third quarter was a very strong one for North American equity indices as U.S. and Canada started to relax the most stringent COVID-19 restrictions. Our merger arbitrage funds performed well during the period as well, the Picton Mahoney Fortified Arbitrage Alternative Fund (Class F) returned 3.11% during the third quarter and the Picton Mahoney Fortified Arbitrage Alternative Plus Fund (Class F) returned 6.46% during the quarter.

Special Purpose Acquisition Companies (SPACs)

SPACs continue to shine as an area of opportunity - we are seeing each month’s new issuance outpace the last. More importantly, the pace of SPACs announcing targets they intend to take public has been impressive. In September alone we saw many such announcements where the SPAC experienced large gains due to the positive reception in the market, including Kensington Capital Acquisition Corp.’s merger with QuantumScape Corp. and Social Capital Hedosophia Holdings Corp. II merger with OpenDoor Labs Inc. As we have harvested the gains from these successful SPACs, we have been able to redeploy the capital into new SPAC IPOs that are led by some of the most well-known investors and/or management teams in the U.S.

Merger Arbitrage

Many of our merger arbitrage funds largest merger arbitrage deals closed or made significant progress towards doing so during the quarter. Notably, Northview Apartment REIT moved closer to the finishing line and announced they expect to close the first week of November. Outside of select M&A terminations that are being litigated, the universe of merger arbitrage spreads now exhibits annualized spreads approaching pre-pandemic levels. Furthermore, we witnessed an opening of the M&A markets as some large transactions were announced, including Maxim Integrated Products Inc. and Varian Medical Systems, Inc. In particular, there were an unusual number of pharmaceutical deals announced: Principia Biopharma Inc. by Sanofi S. A., Momenta Pharmaceuticals, Inc. by Johnson & Johnson, Immunomedics, Inc. by Gilead Sciences, Inc., and Aimmune Therapeutics, Inc. by Nestle S.A.
Performance Returns Table for the Picton Mahoney Fortified Arbitrage Fund Class F and Picton Mahoney Fortified Arbitrage Alternative Fund Class F
For the funds’ full performance, visit
This material has been published by Picton Mahoney Asset Management (“PMAM”) on October 21, 2020. 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.

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