GAM is to launch a new merger arbitrage strategy in July, subject to regulatory approval, which will focus on inefficiencies in the market prices of companies that may occur after the announcement of corporate events such as mergers, acquisitions or spin-offs.
Arbitrage opportunities may also arise after company-specific news, such as the inclusion of its shares in major market indices. Events like these offer the potential for risk arbitrage, and the strategy aims to exploit a set of low-risk opportunities to generate alpha.
Risk management is embedded in the portfolio construction by keeping a suitable level of diversification across all of these different events. The fund’s investment process is bottom-up, with overall country and sector allocation fully driven by the arbitrage opportunities in the market.
The new strategy will complement GAM’s existing range of alternative investment products. Investors are increasingly seeking solutions that offer them compelling risk/return profiles, especially in the current low interest rate environment. The merger arbitrage strategy will be available in a UCITS format, ensuring adequate liquidity and full transparency.
The strategy will be managed by Roberto Bottoli (pictured), who has been running merger arbitrage strategies since 2006. He joined GAM on 1 July 2016 from Allianz Global Investors. He had been with Allianz Global Investors since 1999 and held responsibility for absolute return and multi-asset portfolios since 2004.
GAM’s merger arbitrage strategy has no strict constraints in terms of arbitrage spreads, but will focus on low spreads / low risk deals, and exploit additional types of event-driven, arbitrage opportunities.
Bottoli will be based at GAM’s Lugano office and joins the experienced investment team led by Gianmarco Mondani, chief investment officer of the non-directional equity team in Lugano.
Bottoli says: “I’m very excited to join a team as experienced and respected as the one Gianmarco Mondani has built over the years. This will be the perfect home for me to further develop my long standing experience in merger arbitrage. I strongly believe that this strategy will continue to benefit from global macroeconomic and monetary conditions, which favour revenue growth through acquisitions, keep the price of debt low and provide ideal conditions for M&A activity.”
Mondani says: “We continue to face the challenge of investing in a period of low growth and low yields. With the launch of this new event-driven fund, we are pleased to be able to offer our clients an attractive additional product that helps them diversify their portfolios away from traditional assets. I am very glad that Roberto Bottoli has joined our team, as he brings along a wealth of experience in this area, and I’m looking forward to working closely with him.”
