Geneva Arbitrage Fund Opens Up To Investors

Mar 31 2006 | 12:00am ET

Butcher’s Hill Capital is opening up its first fund, the Geneva Arbitrage Fund, to outside investors and has just received its first investment from a fund-of-funds. Lance Eckel, managing member of the firm, said that he and partner Chris Tidmore launched the strategy in October 2004, but they wanted to have a solid track record before they began targeting institutions.

The fund, which has $5 million in assets under management, has just completed a 15-month audit and was up 5% last year. The Geneva Arbitrage Fund holds a diversified portfolio of investments in mergers and acquisitions, though it concentrates on small deals—those in which the target company has a market capitalization of less than $1 billion.

“We focus on small- to medium-sized transitions because the returns tend to be more attractive than the larger deals,” Eckel said. He added that smaller deals attract less attention than larger ones and often fly under the radar of large arbitrage funds, allowing his fund to capture larger spreads than those that exist on the bigger deals in the market.

Eckel said the fund also complements its M&A portfolio with a relative value strategy that identifies securities of companies that are undervalued relative to those of similar companies. He explained that the fund is able to profit from a convergence in prices between the securities while creating a market neutral portfolio of positions.

Earlier this month, Barrett Capital, which manages the Nautical Mile Fund, a fund-of-funds vehicle that currently invests with six underlying managers, made an investment in the Geneva Arbitrage Fund. Russell Lundeberg, managing partner at Barrett, said: “It’s a quality company. They consistently go the extra step in every part of their process. They have a lot of flexibility and creativity.”

The minimum investment in the Geneva Arbitrage Fund is $250,000. There is no lockup, though there is a 5% penalty if investors pull money in the first 12 months. The fees are 1.5% for management and 20% for performance.

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