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Polygon’s catalyst-driven convertibles strategy rebrands as Acasta as opportunities rise

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Polygon Global Partners’ convertibles-focused unit has rebranded as Acasta Partners, and its flagship global long/short Polygon Convertible Opportunity strategy, led by CIO Mike Humphries, has been renamed Acasta Global.

The strategy was originally launched by Humphries in 2009 in the aftermath of the Global Financial Crisis, using in-depth research to construct a concentrated portfolio of positions aimed at generating returns in defensible niches throughout market cycles. 

Today, it has some USD900 million in assets under management, with offices in London, New York, and Florida. 

Performance data seen by Hedgeweek indicates the strategy has scored double-digit annual returns in eight of its 12 years since inception, with no down years.

The renaming takes its idea from the Acasta Gneiss, a rock outcropping in the Canadian Northwest Territories near the Acasta River, which was metamorphosed approximately four billion years ago. The diverse minerals and visibly distinct bands serve as a metaphor for the firm’s multi-disciplinary approach to investing and the team’s robust framework which evolved over decades working together.

The portfolio is built using a mix of traditional arbitrage trading in convertible bonds and volatility-linked instruments, commodities, metals and mining companies, along with an event- and catalyst-driven investment approach to certain credit markets.

“In terms of the strategy, converts have always been really at the heart of what we do, but it’s generally about 60 per cent – it’s not the entirety of the strategy,” Humphries told Hedgeweek. “We also do opportunistic fundamental and event-driven investments in the credit sector.  Additionally, we have a focus on the metals and mining space as well as doing some volatility trading. Three of those four strategies have been with us since inception.”

Expanding on the strategy’s more nuanced convertibles focus, he explains: “When the arbitrage is compelling, we will, like other hedge funds in this space, get active in that. But it can be a pretty cyclical opportunity set. 

“We tend to lean into what I would call event catalyst-driven situations, and opportunities using the convertible product.”

Rather than target small convertible market discrepancies stemming from a bond mispricing by a few points, Humphries and his team instead utilise more fundamental, event-driven expertise to build more heavily-researched, concentrated positions that are based around what the team believes to be mispricings that are often tied to certain catalysts. 

“Throughout the history of the fund that has been fundamental to our approach. It might be a dividend, an M&A situation, a corporate action, or even stock-borrower related – it could be all sorts of different things.”

Looking ahead, Humphries remains optimistic on the outlook both for the convertibles market and, in turn, the opportunities for Acasta’s strategy.

“The market itself has grown pretty dramatically over the last few years – it’s been one of the securities that has seen a lot of issuance. I think it’s also an easier product to sell on a quick timeline – you can do a convert deal overnight, rather than having to do a roadshow. It traditionally doesn’t come with as stringent covenants, the coupons are reduced, and it’s more flexible – you give away some equity upside for that flexibility and better cash flow for the company. There are a lot of new issuers in this space, and that’s something that we would expect to continue.”

He continues: “We see it as a bigger market that is ripe with opportunity for things to be mispriced. The more volatile the underlying background – whether it’s economic or whether its geopolitical volatility – then the more likely stocks and securities are to get mispriced. 

“Within the converts space, we see ample opportunity, though we’re pretty stringent about the way we manage risk. We try to be careful about having an asymmetric risk reward profile, and preserving capital in ugly environments, which I think often leaves us in a pretty good spot to take advantage of volatility in the markets, and to add risk, and to be a strategy that can put capital to work when others may be headed for the sidelines.”

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