The Picton Mahoney Fortified Arbitrage Alternative Fund Cl F returned 1.01%, and Picton Mahoney Fortified Arbitrage Plus Alternative Fund Cl F returned 1.51% in the first quarter of 2024.
The biggest driver of the funds’ returns this quarter was our position in Splunk Inc. (SPLK), which has been the largest position for a while. This was a US$25bn acquisition by Cisco that closed in March. When the deal was first announced in September 2023, it traded at a quite generous spread of ~8% gross because Cisco guided to an expected close of 9 to 12 months given the global antitrust reviews required. We took an early position as we did not believe there was merit to deep scrutiny around competition and were rewarded when the U.S. cleared the transaction in November without a request for further information. The rest of the regulatory approvals were received by mid-March, generating an annualized return of ~18% on our first purchases given the accelerated timing. Further, we also held positions in two series of SPLK convertible bonds, which provided attractive returns with less downside risk than the common shares. As a bonus, one series of convertibles featured a make-whole that generated higher returns the quicker the deal completed.
Another large position that received regulatory approvals in March was the Canadian-listed Pembina Pipeline Corporation (“Pembina”) sub-receipts. Pembina acquired from Enbridge Inc. the stake it did not already own in the Alliance Pipeline and Aux Sable assets. As these assets were already commercially managed and operated by Pembina we saw this as a low risk opportunity given there was no change of control to concern regulators.
A number of large deals were announced this quarter that we are researching and monitoring for more attractive entry points, as they are all long-dated deals with some novel antitrust risk: ~US$35bn Discover Financial Services (DFS) being acquired by Capital One Financial Corporation (COF); ~US$35bn Ansys (ANSS) being acquired by Synopsys (SNPS); ~US$10bn Catalent,Inc. (CTLT) being acquired by Novo Holdings.
The SPAC market remains relatively quiet, with six new issues priced in the quarter, raising a total of almost US$700mm in proceeds.
| 1M (%) | 3M (%) | 6M (%) | 1YR (%) | 3YR (%)* | 5YR (%)* | Since Inception* | |
| Picton Mahoney Fortified Arbitrage Alternative Fund (Class F) | 0,36 | 0,96 | 1,94 | 4,07 | 2,38 | 5,65 | 5,50 (jan. 3, 2019) |
| Picton Mahoney Fortified Arbitrage Plus Alternative Fund (Class F) | 0,51 | 1,38 | 2,81 | 5,84 | 3,70 | 10,14 | 9,78 (ian. 3, 2019) |
