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BCK Capital Management – Best Event Driven Merger Arbitrage Fund

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BCK Capital Management was established in December 2015 and operates a global special situations fund – BCK Capital Master Fund Ltd – which comprises two complementary strategies: one catalyst-driven, the other merger arbitrage. 

BCK Capital runs a tightly hedged, market neutral strategy. Since inception, the fund has generated positive gross performance in every month where the S&P 500 Index declined. 

Overseeing the investment team as CIO and the founder of BCK Capital is Wayne Yu, who lifted out of Societe Generale’s proprietary trading desk with fellow co-founders Markus Homor, Steven Heller and Peter Brady, who were also joined at inception by co-founder David Sommers. 

“I think there are two aspects of our team that help us stand out from the crowd,” says Peter Brady, Head of Business Development at BCK. “One is that whilst BCK is a relatively new firm, the majority of our team all worked together previously at Societe Generale. For a young fund, the investment team has significant experience, specifically in analysing and investing in event driven situations. 

“Secondly, the legal background of Wayne and David is important. Both spent time at Wachtell, Lipton, Rosen & Katz, one of the leading corporate law firms in the US. Most hedge funds are populated with people who come from a Wall Street trading perspective whereas Wayne and David come at it from being inside the boardroom and advising companies on M&A from a legal perspective.”

BCK takes a differentiated approach to event driven investing. The team focuses on complex situations with attractive risk/reward potential and seeks to avoid crowded trades. Furthermore, the fund only targets events with defined timeframes (hard catalysts), with each investment opportunity subject to careful fundamental analysis of both the company as well as the event in question. 

“We tend to seek out complex situations in the market that others might choose to avoid, such as regulatory situations, legal situations, cross-border transactional situations. We’ve found historically that situations that are more complex are more likely to be misunderstood and, therefore, mispriced by the market” says Brady. 

BCK’s investment ideas are sourced from many different avenues including: company, industry and market news; top-down catalysts; bottom-up company analysis and specialised broker research.

On the merger side, BCK analyses the deal flow and closely follows transactions in the market. However, only a small percentage of those deals meet BCK’s investment criteria. 

 “Deals that are complex are particularly interesting to us. Also, given our size we can look at some smaller deals and can be more nimble and trade around catalysts very effectively.”

On the catalyst side, BCK hedges each individual situation to neutralise market and sector risk and to isolate specific catalysts. BCK also employs stop-losses to minimise risk in each trade. BCK believes there is a strong synergy between its catalyst and merger strategies. 

As Brady explains: “When we look at a merger we do a deep dive on the company, the industry it operates in, all the possible risks that could cause the deal to collapse, etc. During the course of doing that deep dive, we might identify interesting potential catalysts in that sector with a competitor, or perhaps regulatory or other changes that might impact the companies not involved in the merger. So the work we do on the merger part of the portfolio can lead to us identifying catalyst opportunities.”

On winning this year’s award, Brady says: “It’s nice to be recognised, and timing wise, it’s great as we approach our two-year anniversary. Winning this award adds to the overall positive momentum for the business.” 

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