Carmignac Portfolio Merger Arbitrage

The fund employs a low volatility approach focused on announced M&A transactions. The portfolio is run by a seasoned team with nearly two decades of investment experience and uses a consistent investment approach that combines capital structure analysis, internal risk ratings and expected returns. The investment universe includes M&A transactions in developed countries, with a liquidity filter ensuring focus on the most liquid transactions (min. € 500m in the US and €300m in Europe). Every transaction undergoes both quantitative and qualitative evaluations, leading to a rating system of A, B, or C. This rating depends on the number of risk factors involved e.g. the nature of the offer (hostile or friendly), the buyer's typology (strategic or financial), the relative size of the buyer to the target, competitive issues, etc with 'A' indicating minimal risk, 'B' for moderate risk, and 'C' for significant risk. Transactions with any of these risk factors are immediately rated 'C'. A thorough qualitative analysis of each transaction is performed to further assess its potential, considering various secondary factors that might affect the discount's quality and volatility. The portfolio construction process follows a bottom-up approach across three key stages: deals selection based on risk/reward expectations, dynamic weighting of positions according to potential drawdowns and liquidity, and strategic implementation. This implementation varies from long positions in cash offers to a mix of long and short positions in stock offers, aiming for diversification across a significant number of M&A operations and actively managing risk exposure and currency risks. This approach allows for flexible adaptation to changing market conditions and opportunities. The fund seeks to outperform €ster +100bps over a 3-year investment horizon with a volatility of approx. 2%. The team also offer a more return seeking version of the strategy via the “Carmignac Portfolio Merger Arb Plus" fund which has a slightly broader remit and has a 300bps higher return target.