Trium Capital hires ex-Millennium and Sandell manager Felix Lo to launch new M&A hedge fund strategy

M&A

Felix Lo, a merger arbitrage specialist who managed money at Sandell Asset Management and Izzy Englander’s Millennium Management, has joined Trium Capital to run a new USD200 million global event driven fund targeting the ongoing resurgence in corporate M&A activity. 

Lo spent 10 years at Sandell where managed its Global Merger Arbitrage & Event portfolio, which ran some USD1.4 billion of assets. He moved to LMR in 2017 where he led the same strategy alongside analyst Neo Tsangarides, before the pair joined Millennium in 2019 managing up to USD500 million. 

Lo and Tsangarides are launching the Trium Khartes Event Driven Fund, with an expected USD200 million based comprising investor commitments, a double-digit million seed pledge from Trium, and significant ‘skin-in-the-game’ capital from Lo himself. 

The new strategy will look to capitalise on M&A and corporate events globally, which are enjoying a resurgence as Covid cases have fallen in many countries and economies begin to unlock.  

“The second half of 2020 was the busiest on record and, overall, M&A activity has now fully recovered to above pre-Covid levels,” Lo said of the prevailing deal landscape. “The volume and size of deals in 2021 is outstripping available capital, leading to wider deal spreads and above-average returns.” 

The strategy will target uncorrelated returns through a broad focus on merger and corporate events across the spectrum. Specifically, the team will look to generate alpha from relatively under-covered small and mid-cap situations globally, while increasing diversification and curbing volatility. 

While large cap deal activity had exceeded pre-pandemic levels by December, which Lo said “bodes well for forward looking activity”, regulatory uncertainty and strong demand for new issuances and SPACs is absorbing capital. A further tailwind for returns is that increased PE activity in the early stages of the recovery is now being supplanted by strategic activity, as corporates make deals to adapt to the post-pandemic world.  

“With a busy universe, there will be more opportunity to unearth under-covered smaller mid-cap deals across geographies, creating more scope for alpha generation,” Lo explained. 

Trium Capital’s co-head Donald Pepper said merger arb strategies offer uncorrelated returns as well as a “natural hedge” against rising rates, thanks to the relatively short duration of trades. 

“Indeed, higher interest rates historically have corresponded with higher absolute returns for merger arb funds as they benefit from both higher base rates and higher risk premiums for deal risk,” Pepper observed.