Accelerate Arbitrage Fund

Alternative Income.

The Accelerate Arbitrage Fund (TSX: ARB) is a tax-efficient fixed-income alternative that generates income and capital appreciation through merger arbitrage.

About the Fund

The Accelerate Arbitrage Fund (TSX: ARB) is a merger arbitrage investment strategy. 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 acquirer companies involved in mergers or corporate actions, where applicable.

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
  • Provide an attractive distribution yield
  • Generate consistent, low-volatility returns
ARB TRADING DATA
NAV:
Date:
RESEARCH
WEBCAST
SUBSCRIBE TO OUR DISTRIBUTION LIST TO STAY UPDATED ON ARB
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:
$0.26 per quarter

Exchange:
TSX

Currency:
CAD

Risk Rating:
Low

RESOURCES

Track Record

SPAC and Merger Arbitrage Explained

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.

ARB,TSX,Merger arbitrage,stock price,ARB stock,ETF,hedge fund,Canadian hedge fund,ACCELERATE financial technologies,accelerate shares,accelerate,accelerate calgary,alternative investing calgary,hedge funds canada, hedge funds calgary,private equity,accelerate investing canada,accelerate investing calgary,liquid alternatives,hedge fund ETF,private equity ETF,Julian Klymochko,Jai Hawker,Michael Kesslering,Derek Euale,calgary finance,calgary hedge fund,TSX,equity index,canadian,etf,ATSX,canadian equity,hedge fund,alternative investing,Accelerate Enhanced Canadian Benchmark Alternative Fund,Accelerate Arbitrage Fund,Merger Arbitrage Fund,Merger acquisition fund,ARB,Merger Arbitrage,Arbitrage funds,arb etf,alpha arb etf,arb etf canada,accelerate arb etf,arbitrage fund,arbitrage funds in US,arbitrage funds canada,arbitrage merger fund,merger fund,arbitrage trading,dividend arbitrage,companies that use arbitrage strategy,dividend arbitrage,risk arbitrage,merger arbitrage investment strategy,The Fund,mergers,ARB,ARB ETF,What is merger arbitrage,merger arbitrage funds

Performance as of April 30, 2024

Ticker 1 Month 3 Months YTD 1 Year 3 Year Since Inception
ARB -0.2% 2.5% 3.0% 6.4% 1.6% 9.1%
Fund Exposure
Deal Type Exposure

Fund Holdings as of April 30, 2024

Long Security Name
Weight
Everbridge Inc 5.7%
Hess Corp 4.4%
Carrols Restaurant Group Inc 4.2%
Tricon Residential Inc 4.1%
Shockwave Medical Inc 4.1%
Juniper Networks Inc 3.8%
Masonite International Corp 3.6%
Learn CW Investment Corp 3.6%
Nuvei Corporation 3.5%
Fortune Rise Acquisition Corp 3.4%
Osiris Acquisition Corp 3.4%
Pioneer Natural Resources Co 3.3%
Globalink Investment Inc 3.2%
Osino Resources Corp 3.2%
Whole Earth Brands Inc 3.1%
Hibbett Inc 3.0%
MDF Commerce Inc 2.9%
Alpine Immune Sciences Inc 2.7%
Perception Capital Corp III 2.6%
Legato Merger Corp III 2.5%
Short Security Name
Weight
Chevron Corporation -4.6%
Exxon Mobil Corp -3.4%
Silvercorp Metals Inc. -2.0%
WillScot Mobile Mini Holdings Corp -0.9%
Alamos Gold Inc. -0.3%

DISCLAIMER: This information on this web page does not constitute investment, legal or tax advice. Performance is inclusive of reinvested distributions. Past performance is not indicative of future results. Any data provided on this web page should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information on this web page is based on market conditions and may fluctuate and change without notice. Accelerate does not accept any liability for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on all or any part of this website and any liability is expressly disclaimed.

EXPLORE OTHER INVESTMENT SOLUTIONS