GAM Star (Lux) Merger Arbitrage

The fund is managed by Roberto Bottoli, who prior to joining GAM, managed a similar strategy initially in multi-strategy portfolios and then within a dedicated UCITS structure at Allianz GI between 2006 until 2016. The strategy trades a global universe of risk arbitrage opportunities, focussing on merger arbitrage, with spin-offs, holding structures trades and index arbitrage used as additional sources of returns and for diversification purposes. The merger arbitrage sleeve is the core investment strategy with a c. 70-90% allocation and consists of a typical merger arbitrage strategy, looking to capture the spread arising from uncertainty that a deal will close. The spin-offs sleeve looks to exploit the recurring price patterns seen in these market events, while the PM also looks to monetise anomalies in the price of holding company structures. Further, the strategy has the flexibility to allocate to an index arbitrage sleeve, capturing the price impacts on stocks following inclusion/exclusion from major indices. The process begins with a global hard catalyst screen, looking at announced events only in companies with a minimum market cap of $200m whilst excluding hostile deals. The PM typically focuses on deals with spreads between 2-5%, though has the flexibility to invest in higher. When moving higher in the risk spectrum the PM will at times look to reshape the payoff structure, using put options to hedge the associated tail risk. The PM believes diversification of deals is the best way to manage risk, as such the portfolio will look to hold 60-80 deals, with a self imposed max position size of 3.5%. Further, there is no use of options for a macro overlay. More recently, SPAC arbitrage has moved into the merger arbitrage sleeve. The PM looks to buy SPAC shares at a discount to NAV and exercise at redemption. The portfolio contains a diversified SPAC portfolio with roughly 80 names, with each position no more than 0.5% of the fund, with overall SPAC exposure currently representing c. 20% of the fund.