With merger arbitrage proving to be one of the best-performing strategies this year, it is no surprise that some firms are taking time out from regrouping to profit from current opportunities. One such firm is P. Schoenfeld Asset Management, which recently added to its menu of event-driven and credit strategies with a fund focused on investing in announced global merger transactions.
The new initiative comes on the back of crushing losses for the firm over the past year. At its peak in 2008, PSAM managed $3.5 billion, and firm assets were a smidgeon over $1 billion at the beginning of 2009. Yet this year, PSAM funds are up across the board. Its flagship PSAM World Arb Fund is up 15.51% through July after being down 24.51% in 2008.
The new fund, PSAM Merger Fund, plans to capitalize on the decreased number of investors in merger arbitrage that has led to mouth-watering wide spreads. The paucity of merger arb traders has occurred as proprietary trading desks closed and some hedge funds have likewise gotten out of the business.
The fund invests in and takes bets on the securities of companies involved in friendly, hostile, strategic or financial merger events. While there has been limited deal flow so far this year, PSAM expects mergers to continue in the financial services, oil and gas, healthcare and natural resources sectors, particularly in small and mid-cap companies.
PSAM Merger Fund has raised $62 million since its launch in June and is targeting a total of $300 million. PSAM Merger is managed by Peter Schoenfeld, Daniel Goldwater and Douglas Polley. It returned .65% in its first month and is up 1.1% year-to-date through July. PSAM managed $1.2 billion as of July 31. KDA
