Monday, 27 February 2017
Last updated 3 hours ago
Jul 6 2007 | 11:43am ET
London-based NewSmith Capital Partners last month launched a $100 million multi-strategy event-driven hedge fund, and the new offering is off to a strong start.
The NewSmith European Fund launched on June 11, employing three strategies to trade Europe-listed stocks.
In addition to its event-driven positions, the fund uses two types of risk arbitrage and “classic long/short” trades to achieve its goal of a 15% annualized return.
Fund manager Jean Maigrot says the vehicle is extremely opportunistic: The three strategies are “constantly being allocated and reallocated,” with no specific target size for any one strategy.
The fund’s risk arbitrage portfolio is divided into “full-blown merger arbitrage and early-risk arbitrage,” Maigrot says. In the latter, “I exclude all the silly rumors you hear in the market,” he says, emphasizing that the fund will only open an early risk arbitrage position following an event, such as an announcement of merger talks or a hostile bid. But Maigrot says he is choosy: The fund will have about 50 positions at any given time, and he and his co-managers “hand-pick and cherry-pick the trades that I want to get involved in.”
The fund’s risk and merger arb trades are also the one exception to its European focus, as it will consider cross-border mergers, such as Canadian Thompson Corp.’s proposed acquisition of Britain’s Reuters.
Maigrot is especially excited about the fund’s long/short portfolio.
“I absolutely love shorting stocks,” he says. “I know how to do it, and I make a lot of money doing it.”
“We are looking to generate pure alpha on the short side; it is not being used as an overlay,” he adds.
While he declined to divulge any figures—“numbers are meaningless at this stage,” he says—Maigrot reports that the fund has posted a positive return in its first three weeks, “a huge result, considering that event-driven funds, especially in Europe, didn’t do very well” over that period.
Maigrot joined NewSmith earlier this year to launch the fund, which he runs with Jeremy Silewicz and Sarah Lavers. Maigrot, who was previously at ABN Amro where he ran the European proprietary trading desk, is no stranger to his new bosses: He worked with three of NewSmith’s four founding partners at Smith New Court in the mid-1980s, prior to that firm’s acquisition by Merrill Lynch in 1995. Silewicz most recently served as an institutional and hedge fund research salesman at Goldman Sachs, while Lavers worked as a consultant at Liability Solutions, in addition to stints in research at Swiss Bank and Schroders Securities.
The NewSmith European Fund charges 2% for management and 20% for performance. There is a US$250,000 minimum investment, with monthly redemptions with 45 days’ notice after a one-year lockup. Maigrot promises “very generous liquidity” in the fund for redemptions. Current investors include an endowment, high net-worth individuals and the firm’s partners.