Accelerate Arbitrage Fund

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About the Fund

The Accelerate Arbitrage Fund (TSX: ARB) provides exposure to SPAC arbitrage and merger arbitrage investment strategies.  The Fund aims to generate consistent, low-volatility returns by investing in listed equity, debt or derivative securities of target companies involved in mergers or corporate actions, while selling short certain listed equity, debt or derivative securities of acquiror companies involved in mergers or corporate actions, where applicable.

What is SPAC Arbitrage?

SPAC Arbitrage is an investment strategy that seeks to acquire shares or units of a special purpose acquisition company (“SPAC”) at or below its net asset value (“NAV”) in order to generate a return through either:

  • an exit at a premium to NAV once the SPAC announces a business combination
  • an exit at NAV, being the IPO price plus accrued interest, through a redemption before the deal vote or through the liquidation of the SPAC

What is Merger Arbitrage?

Merger Arbitrage is an investment strategy that capitalizes on the spread between a company’s current share price and the consideration paid for its acquisition in light of an announced merger transaction. The merger risk premium— or the spread between the acquisition price and the trading price of a stock—compensates the arbitrageur for the risk of the acquisition failing to close. The merger arbitrageur’s goal is to “lock in” the spread earned upon deal closing and to profit from buying a takeover stock at a discount to its acquisition price.

Investment Objectives:

  • Outperform the S&P Merger Arbitrage Index
  • Generate consistent, low-volatility returns
  • Provide an attractive distribution yield
QUICK FACTS

Type:
Event-driven

Structure:
Alternative ETF

Date Started:
April 7, 2020

Management Fee:
0.95%

Performance Fee:
None

Investment Manager:
Accelerate Financial Technologies Inc.

Distribution:
$0.17 per quarter

Exchange:
TSX

Currency:
CAD

Risk Rating:
Low

Historical Track Record

DISCLAIMER: Results of the Accelerate Arbitrage Fund reference portfolio are hypothetical and do not reflect investment results attained by any investor. Past performance is not indicative of future results. Performance is net of all estimated trading fees and performance fees. Investing involves varying degrees of risk and there can be no assurance that the future performance of any investment strategy will be profitable. This does not constitute investment advice.

Investment Process

Deal Evaluation & Selection 

Accelerate uses regulatory filings, media, proprietary data screens, and sell-side analyst reports to source merger arbitrage investment opportunities. Once sourced, a deal is then placed into the merger database where the team conducts a review of the data through; press releases, merger agreements, proxy statements, and additional due diligence materials. A proprietary “AlphaRank” risk rating is then assigned to each merger transaction. Furthermore, Accelerate calculates 2 key factors in the selection process; the merger yield and the implied odds of success to determine the securities’ risk rating. If the merger yield is attractive, and exceeds the investor’s cost of capital, the team will move forward with the next step in the investment process.

Risk Management

Five key factors are considered to ensure that risks are appropriately managed:

• Does the buyer lack credibility?
• Does the financing source lack credibility?
• Is the deal non-definitive?
• What is the extent of the regulatory risk?
• Is there a buy-side vote?

Buy-side votes allow shareholders to vote against the original proposed deal in order to get a premium from a hostile interloper offering more, causing potential losses for an arbitrageur.

Position Sizing & Portfolio Management

This process aims to limit the risk of loss on a deal break to a -2% NAV decline. “AlphaRank” risk ratings are also considered when allocating position sizes. Riskier deals may represent smaller allocations in the portfolio.

Execution

Merger arbitrage is typically conducted on a company’s common shares. However, there may be other opportunities to earn a merger spread, including through a company’s preferred shares or bonds, or through derivative securities such as options or warrants. If one is trading the common shares of a target in an all-cash deal, then the trade is fairly simple: the trader places their bid for the target at the desired price and waits to get hit. If the deal includes stock consideration, the trader first has to ensure the short borrow is secured in order to short the acquiror’s stock. Once short borrow has been secured, the trader can set up the spread. To implement this type of trade, one should use a pair trader. Pair traders work by trading both legs of a merger arbitrage spread, being the target and acquiror, at the same time. The trader sets the desired merger spread into the pair trading system, based on the merger consideration, and gets filled on both legs long and short.

Deal Monitoring

After successful deal analysis, risk mitigating, position sizing, and execution, the arbitrageur goes into monitor-mode. In the case of tender offers or takeover bids, shareholders must tender shares to receive the consideration amount, whereas in mergers, a vote must be cast and the type of consideration (cash or shares) elected. Shareholder votes and regulatory approvals need to be settled prior to the deal completion.

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Performance as of 2021-Jun-30

Ticker 1 Month 3 Months YTD 1 Year 3 Year Since Inception
ARB 0.5% 0.8% 7.5% 29.0% n/a 31.0%
Fund Exposure
Deal Type Exposure

Fund Holdings as of 2021-Jun-30

Long Security Name Weight
Slack Technologies Inc 3.51%
Nuance Communications Inc 3.51%
Cincinnati Bell Inc 3.25%
W R Grace & Co 3.10%
Willis Towers Watson PLC 3.08%
Proofpoint Inc 3.04%
Soliton Inc 2.95%
MMA Capital Holdings Inc 2.38%
Cloudera Inc 2.23%
M3-Brigade Acquisition II Corp Units 2.10%
MedTech Acquisition Corp Units 1.63%
Vickers Vantage Corp I Units 1.56%
Kansas City Southern 1.51%
7GC & Co Holdings Inc Units 1.09%
Cartesian Growth Corp Units 1.43%
Navistar International Corp 1.43%
26 Capital Acquisition Corp Units 1.31%
Isleworth Healthcare Acquisition Corp 1.30%
Monument Circle Acquisition Corp Units 1.28%
CF Acquisition Corp VIII Units 1.26%
D8 Holdings Corp 1.26%
IG Acquisition Corp 1.19%
Avanti Acquisition Corp 1.19%
Conx Corp Units 1.17%
MCAP Acquisition Corp Units 1.15%
Global SPAC Partners Co Units 1.13%
Executive Network Partnering Corp 1.13%
Forest Road Acquisition Corp I Units 1.11%
Roman DBDR Tech Acquisition Corp 1.08%
Lefteris Acquisition Corp Units 1.06%
HIG Acquisition Corp Units 1.06%
Spring Valley Acquisition Corp 1.04%
Marlin Technology Corp Units 1.03%
Adit EdTech Acquisition Corp Units 1.02%
Property Solutions Acquisition Corp Units 1.02%
CITIC Capital Acquisition Corp 1.02%
Atlantic Avenue Acquisition Corp 1.01%
Anzu Special Acquisition Corp Units 1.00%
Cerberus Telecom Acquisition Corp 0.99%
Silver Spike Acquisition Corp Units 0.98%
Longview Acquisition Corp II Units 0.98%
KKR Acquisition Holdings I Corp Units 0.97%
Peridot Acquisition Corp II Units 0.97%
Blue Water Acquisition Corp 0.97%
Thayer Ventures Acquisition Corp Units 0.96%
EdtechX Holdings Acquisition Corp 0.96%
Landcadia Holdings IV Inc Units 0.96%
Two 0.94%
Lionheart Acquisition Corp II 0.90%
Delwinds Insurance Acquisition Corp Units 0.88%
Social Capital Hedosophia Hldgs Corp VI 0.88%
PMV Consumer Acquisition Corp 0.87%
Kingswood Acquisition Corp 0.86%
Viveon Health Acquisition Corp 0.85%
FTAC Hera Acquisition Corp Units 0.84%
Fintech Evolution Acquisition Corp Units 0.83%
TCW Special Purpose Acquisition Corp Units 0.83%
Agile Growth Corp Units 0.83%
Supernova Partners Acquisition Co III Units 0.83%
InterPrivate IV InfraTech Partners Units 0.83%
Rosecliff Acquisition Corp I Units 0.83%
Khosla Ventures Acquisition Corp 0.82%
Progress Acquisition Corp Units 0.81%
Dragoneer Growth Opportunities Units 0.80%
EG Acquisition Corp Units 0.80%
Hudson Executive Investment Co Units 0.80%
Sandbridge Acquisition Corp 0.77%
Forum Merger IV Corp Units 0.77%
Periphas Capital Partnering Corp 0.74%
Supernova Partners Acquisition Co II Units 0.73%
Arrowroot Acquisition Corp Units 0.72%
DHB Capital Corp Units 0.72%
Fusion Acquisition Corp II Units 0.72%
Twelve Seas Investment Co II Units 0.72%
Maquia Capital Acquisition Corporation Units 0.70%
VPC Impact Acquisition Holdings 0.70%
Glenfarne Merger Corp Units 0.70%
Horizon Acquisition Corp II Units 0.70%
Virgin Group Acquisition Corp Units 0.69%
Fortress Value Acquisition Corp Units 0.69%
ESM Acquisition Corp Units 0.69%
Tech and Energy Transition Corp Units 0.69%
Archimedes Tech SPAC Partners Units 0.69%
Colonnade Acquisition Corp II Units 0.69%
E.Merge Technology Acquisition Corp 0.69%
Spartacus Acquisition Corp 0.68%
Bluescape Opportunities Acquisition Corp 0.68%
Poema Global Holdings Corp 0.67%
FAST Acquisition Corp II Units 0.67%
ArcLight Clean Transition Corp Units 0.64%
Apollo Strategic Growth Capital Units 0.64%
Big Sky Growth Partners Inc Units 0.64%
InterPrivate II Acquisition Corp Units 0.64%
InterPrivate III Financial Partners Units 0.63%
Montes Archimedes Acquisition Corp. 0.61%
Recharge Acquisition Corp 0.60%
NextGen Acquisition Corp 0.60%
Thunder Bridge Capital Partners III Units 0.58%
Kairos Acquisition Corp 0.58%
Amplitude Healthcare Acquisition Corp 0.56%
Vector Acquisition Corp II 0.55%
Leo Holdings Corp II Units 0.54%
European Biotech Acquisition Corp Units 0.54%
PTK Acquisition Corp 0.54%
Pivotal Investment Corp III Units 0.54%
Broadstone Acquisition Corp 0.54%
VPC Impact Acquisition Holdings Units 0.54%
Burgundy Technology Acquisition Corp 0.54%
East Resources Acquisition Corp 0.53%
Duddell Street Acquisition Corp 0.53%
KL Acquisition Corp 0.52%
LightJump Acquisition Corp Units 0.52%
Bright Lights Acquisition Corp 0.52%
Kingswood Acquisition Corp Units 0.52%
Tiga Acquisition Corp Units 0.52%
Far Peak Acquisition Corp Units 0.51%
OTR Acquisition Corp Units 0.51%
Cascade Acquisition Corp Units 0.50%
Northern Star Investment Corp IV Units 0.49%
DPCM Capital Inc 0.49%
Breeze Holdings Acquisition Corp 0.49%
Zanite Acquisition Corp Units 0.49%
AEA-Bridges Impact Corp Units 0.49%
EdtechX Holdings Acquisition Corp Units 0.49%
Vistas Media Acquisition Co Inc 0.49%
TWC Tech Holdings II Corp 0.49%
Tailwind Acquisition Corp 0.49%
Jaws Hurricane Acquisition Corp Units 0.48%
Jaws Juggernaut Acquisition Corp Units 0.48%
Alkuri Global Acquisition Corp 0.48%
Sandbridge X2 Corp Units 0.48%
Better World Acquisition Corp Units 0.47%
New Beginnings Acquisition Corp 0.47%
Software Acquisition Group Inc 0.47%
Edoc Acquisition Corp 0.46%
Sports Ventures Acquisition Corp 0.45%
Northern Genesis Acquisition Corp Units 0.45%
First Reserve Sustainable Growth Corp Units 0.44%
Goal Acquisitions Corp Units 0.44%
African Gold Acquisition Corp Units 0.44%
Oyster Enterprises Acquisition Corp Units 0.43%
Astrea Acquisition Corp Units 0.43%
BOA Acquisition Corp Units 0.43%
BYTE Acquisition Corp Units 0.42%
GigCapital4 Inc 0.42%
dMY Technology Group Inc IV Units 0.42%
Gores Guggenheim Inc Units 0.42%
Seaport Global Acquisition Corp 0.40%
Moringa Acquisition Corp Units 0.40%
Benessere Capital Acquisition 0.40%
Kismet Acquisition One Corp 0.39%
Tekkorp Digital Acquisition Corp Units 0.39%
KINS Technology Group Inc Units 0.39%
Priveterra Acquisition Corp Units 0.39%
Genesis Park Acquisition Corp 0.35%
Galileo Acquisition Corp 0.34%
Northern Star Investment Corp III Units 0.34%
Aequi Acquisition Corp Units 0.34%
Atlas Crest Investment Corp 0.34%
Omnichannel Acquisition Corp Units 0.33%
Malacca Straits Acquisition Corp 0.32%
FinTech Acquisition Corp VI Units 0.32%
Ackrell Spac Partners I Corp Units 0.30%
NavSight Holdings Inc 0.30%
Yellowstone Acquisition Corp Units 0.30%
CF Acquisition Corp V Units 0.29%
FTAC Athena Acquisition Corp Units 0.29%
Atlas Crest Investment Corp II Units 0.29%
Mallard Acquisition Corp Units 0.29%
CF Acquisition Corp VI Units 0.29%
Bite Acquisition Corp Units 0.29%
Jiya Acquisition Corp 0.29%
Consonance-HFW Acquisition Corp 0.29%
Empowerment & Inclusion Capital 0.28%
Pine Island Acquisition Corp 0.27%
Ascendant Digital Acquisition Corp 0.27%
LMF Acquisition Opportunities Corp Units 0.26%
Osprey Technology Acquisition Corp Warrants 0.26%
Motion Acquisition Corp 0.26%
L&F Acquisition Corp Units 0.26%
Bright Lights Acquisition Corp Units 0.26%
NewHold Investment Corp 0.25%
Capstar Special Purpose Acquisition Corp 0.25%
Live Oak Acquisition Corp II 0.25%
Warrior Technologies Acquisition Corp Units 0.25%
KINS Technology Group Inc 0.25%
Independence Holdings Corp Units 0.24%
Cohn Robbins Holdings Corp 0.24%
Leo Holdings III Corp 0.23%
Empower Ltd Warrants 0.23%
LGL Systems Acquisition Corp 0.22%
Ackrell Spac Partners I Co 0.20%
Sports Entertainment Acquisiti 0.20%
Seven Oaks Acquisition Corp 0.19%
Americas Technology Acquisition Corp Units 0.19%
Tastemaker Acquisition Corp 0.18%
CM Life Sciences III Inc Units 0.17%
FG New America Acquisition Corp 0.17%
Prime Impact Acquisition Inc Units 0.16%
Elliott Opportunity II Corp Units 0.16%
Periphas Capital Partnering Corp Units 0.16%
ACON S2 Acquisition Corp 0.16%
Industrial Tech Acquisitions Inc 0.16%
TLG Acquisition One Corp Units 0.15%
Yunhong International 0.15%
Biotech Acquisition Corp Units 0.14%
COVA Acquisition Corp Units 0.14%
Mason Industrial Technology Inc Units 0.14%
Adara Acquisition Corp Units 0.14%
Athlon Acquisition Corp Units 0.14%
Global Partner Acquisition Corp Units 0.14%
ABG Acquisition Corp Inc 0.14%
SCVX Corp 0.12%
Big Cypress Acquisition Corp 0.12%
Sports Entertainment Acquisition 0.10%
DD3 Acquisition Corp II Units 0.10%
Research Alliance Corp II 0.10%
Ignyte Acquisition Corp Units 0.10%
FS Development Corp II 0.10%
DFP Healthcare Acquisitions Corp 0.09%
New Vista Acquisition Corp Units 0.08%
Mudrick Capital Acquisition Co Warrants 0.08%
Empowerment & Inclusion Capital Units 0.08%
Altimar Acquisition Corp III Units 0.06%
Live Oak Mobility Acquisition Corp Units 0.06%
SilverBox Engaged Merger Corp Units 0.06%
Authentic Equity Acquisition Corp Units 0.06%
European Sust Growth Acquisition Corp Units 0.06%
Z-Work Acquisition Corp Units 0.06%
EQ Health Acquisition Corp Units 0.06%
Clarim Acquisition Corp Units 0.06%
HealthCor Catalio Acquisition Corp 0.06%
Fusion Acquisition Corp 0.06%
Short Security Name Weight
Aon PLC -3.41%
Dream Industrial Real Estate I Units -2.96%
Salesforce -1.5%
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