- Anemic activity during this summer month when only 8 new interesting arbitrage situations arose. Margins continue to be binary, i.e. very tight for transactions with no or very little risk and very wide for others;
- We were hoping Air Canada would increase its offer for Transat by 1 or 2$ … but we’ll still be satisfied with the 5$ premium offered!
- Our deep-in-the money convert “Puts” were big winners from higher volatility and price appreciation driven by increased demand as investors seek out defensive opportunities;
- Our core convert arbitrage book also benefited from general price appreciation and the strategy continues to contribute a positive carry for the fund.
FIXED INCOME ARBITRAGE
- Performance slightly negative, with insufficient gains on hedging activities to counter losses on credit and yield curve;
- Widening credit spreads, with several lingering concerns (Brexit, Hong Kong, US- China trade, etc.). Most risky assets are under pressure;
- Back to a slightly positive “credit Dv01”. Maintaining our position for a steepening of the CAN & US yield curve and long CAN vs US bonds.