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AAA-rated manager reveals where to position in event driven

AAA-rated manager reveals where to position in event driven

Europe is presenting some of the best opportunities for event-driven trades as political uncertainty dies down, according to Syquant Capital’s Xavier Morin.

Speaking to Citywire Selector, AAA-rated Morin, who runs the Helium Performance fund, said many corporate activities have triggered in recent weeks and months, which could be due to a less volatile political landscape across Europe.

‘The political and economic outlook for Europe has improved since the French and Dutch elections. Clearly, corporate Europe has become a lot more focused on external growth opportunities and we have seen a lot of deals being triggered since those two elections.

‘The general environment seems to be quite positive for many different event-driven trades, mergers, but also other trades like rights issues, IPOS, spin-offs etc. Europe had fallen back as compared to North America over the last three years so there is still a lot of catching up to be done by European corporates.’

Morin said the increase in capital for new investments should give investors confidence and highlighted one of the fund’s most prominent deals this year.

‘UniCredit and the ‘turnaround’ with many different catalysts illustrates the active environment in the event-driven sub-strategies.

'The stock has offered many arbitrage opportunities since the appointment of new CEO Jean Pierre Mustier. In Q1 and Q2 he triggered a massive rights issue of €13 billion, which was the point we entered the stock.

‘Beyond the usual short-term arbitrage trade around the rights issue, we held onto the position.’

These moves include selling off assets such as Pioneer Investments to Amundi and the sale of NPLs (non-performing loans) to US and Italian private equity funds.

‘Amongst others, the newly-appointed CEO sold off some non-strategic assets including the Eastern Europe exposure which UniCredit held through a Polish bank.

‘The continuing positive news flow and events encouraged us to maintain the position. Throughout the holding period, the position was 100% hedged both for beta exposure and sector exposure with peers such as Italian and European banks.’

Over the three years to the end of August 2017, the Helium Performance fund returned 15.1% in euro terms in the event driven category. This compares with a -1.1% sector average over the same time period.

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