The Amethyst Arbitrage Fund is a low volatility hedge fund using 3 arbitrage strategies, primarily executed on the Canadian market. While event driven (mainly mergers & acquisitions) and convertible securities (debentures, warrants …) arbitrage take advantage of pricing anomalies between contractually related securities, the fixed income arbitrage segment focuses on credit spreads between related securities of Canadian federal, provincial, municipal, and government agency issuers.

This version of the Fund is exclusively available to non-Canadian residents; Canadian resident investors are invited to browse information related to the Canadian version here.

 


INVESTMENT OBJECTIVES

The Amethyst Arbitrage Fund’s primary objective is to realize – independent of equity and bond market fluctuations:

  • an absolute positive return of 5 to 10% above short term rates (CAN 91d. T-Bills rates or 3 mo US Libor, depending on product version),
  • with an annualized volatility of 5 to 7%.

As the Fund is targeted essentially to institutional clients (notably pension plans, foundations and similar), capital protection is emphasized and implies:

  • Conservative use of leverage, strictly limited to prime-broker standard margin
  • A highly diversified portfolio of arbitrage positions
  • Coherent and practical risk control measures

Disciplined portfolio management with rigorous and systematic “bottom-up” analysis of opportunities, have allowed Amethyst to offer returns to its investors with a fairly high degree of independence from both traditional asset classes and comparable arbitrage strategies.

INVESTMENT STRATEGIES

The Fund invests chiefly in the Canadian markets employing arbitrage strategies on

  • EVENT DRIVEN opportunities (mainly mergers & acquisitions, but also buybacks & other opportunities on contractually related securities)
  • CONVERTIBLE securities (mainly convertible debentures/bonds, but also warrants & other exchangeable securities)
  • FIXED INCOME securities (mainly spread strategies using Canadian federal, provincial, municipal and agency backed government debt as well as investment grade corporate bonds)

In general, the portfolio weightings of the first 2 strategies vary between 35% and 45%, while the fixed income arbitrage is capped at 25% of the Fund’s NAV. However, at any given time, these relative weightings will vary according to the opportunity set available to each strategy.

FUND FACTS

FEES STRUCTURE & LIQUIDITY
Management 2% Investment Vehicle Class B shares of a Cayman-based mutual fund company
Performance 20% above Hurdle Rate Valuation Currency $US
Hurdle Rate 3 mo. US LIBOR Dealing Frequency Monthly
High Watermark Yes Valuation Monthly
Early Redemption Fee 2% if < 6 months
1% if < 12 months
Redemption Notice 30 days
Min. Subscription $250,000 Lock-up Period None

PORTFOLIO MANAGERS