Shortlist: Best Ucits product

York Capital has been managing successful event driven strategies for 19 years. The Ucits version of one of its successful offshore funds is managed by York's senior investment team and follows the management company’s investment and risk management guidelines, tailored to comply with Ucits rules.

The investment approach couples fundamental, research-driven financial and business analysis with an experienced view of market and industrial trends. The management company leverages its approximately 50 investment professionals to employ a rigorous, research-intensive due diligence process with an emphasis on companies experiencing corporate catalysts.

The mandate is opportunistic. This means multi-strategy event driven investing, or an ‘all season’ approach. The fund can capitalise on undervalued investment opportunities in virtually all market environments.

The fund focuses primarily on risk arbitrage and special situations equities. Within risk arbitrage, the fund focuses on hostile transactions and those in which the potential for multiple bidders offers greater upside. Special situations can include companies involved in other corporate activities including spin-offs, asset sales and divestitures. A 10% corporate bond exposure limit allows the fund to take advantage of select distressed opportunities as well.

York’s event driven investment style has historically provided returns that are transaction specific, for example, returns based on underlying events and market inefficiencies and therefore less correlated with movements in other markets.

The risk-reward profile of each event is considered with an optimal position size being decided for each event and the managers factoring in a worst-case scenario and downside protection if an investment is not performing well. Post-investment York also monitors its positions with a focus on capital preservation and uses its capital markets expertise to determine opportune exit points, seeking realisations when the company’s targeted value is achieved.

The fund’s managers are bullish in today’s environment and, with current levels of corporate activity, are gearing for a positive year. Their optimism is fuelled by record cash levels on corporate balance sheets, a low-growth gross domestic product (GDP) environment, availability of credit and low cost of borrowing are conducive to merger and acquisition (M&A) activity.

This is being borne out in the market. So far in 2011 merger volumes have continued to climb, marking one of the busiest starts in merger and acquisition (M&A) in the last 10 years. In addition to a robust risk arbitrage opportunity set, the fund’s managers expect to see continued activity related to companies breaking up and focusing on core businesses.

The strategy also limits gross long exposure to no more than 200% of net asset value (NAV), target net long exposure is between 25% and 75%.

Portfolio managers CEO James Dinan and chief investment officer Daniel Schwartz take a ‘hands-on’ approach to portfolio management, supervising York’s portfolio managers and reviewing the global portfolio on a daily basis.

Dinan and Schwartz circulate York’s daily profit and loss report to the entire York team. This facilitates transparency, accountability and open dialogue among all investment professionals. The two are supported by 12 additional equity partners, seven of whom are integrally involved in York’s investment decisions and portfolio review.

Fund facts
Full name of fund: Merrill Lynch Investment Solutions York Event-Driven Ucits Fund
Name of portfolio managers: James Dinan and Daniel Schwartz
Name of investment/management company: York Ucits Holdings
Contact information: Birgit Sammer, Merrill Lynch, 2 King Edward Street, London EC1A 1HQ (+44 (0)20 7; 995 5419; birgit.sammer@baml.com)
Launch date: July 29,  2009
Assets under management: $855.6 million (April 28, 2011)
Please note the below figures are based on EUR B monthly NAVS and up to March 2011 month end.
Net cumulative performance since inception: 17.32% (July 29, 2009 - March 31, 2011)
Annualised return: 9.56% (March 31, 2011)
Annualised volatility: 8.37% (March 31, 2011)
Sharpe ratio: 1.081
Strategy: event driven
Administrator: Société Générale Securities Services
Auditor: PricewaterhouseCoopers
Custodian: Société Générale Bank and Trust and Merrill Lynch International
Legal counsel: Linklaters
Domicile: Luxembourg
Management fee: 1.50% (institutional A, B, E); 1% (institutional D)
Performance fee: 25% of outperformance above Eonia (institutional A); 15% (institutional B); 10% (institutional D); 20% of new net appreciation (institutional E)
Minimum investment: €/$/MMM/Sfr1 million
Redemption/liquidity terms: weekly, T+3 days’ notice