The Arbitrage Credit Opportunities Fund (MUTF:ACFIX) recently completed its third year in operation, qualifying it for a Morningstar rating. The fund, which launched in September 2012, generated annualized returns of +1.87% for the three years ending December 31, 2015, ranking in the top 12% of the 270 funds in Morningstar's Nontraditional Bond Fund category and earning a four-star rating.
Suite of Event Drive Strategies
"The continued success of the Arbitrage Credit Opportunities Fund exhibited by the four-star Morningstar Rating continues to contribute to the realization of my vision for Water Island Capital," said Water Island Capital CIO John Orrico, in a recent announcement. Mr. Orrico went on to detail that vision as one of "a suite of event-driven strategies" consistently delivering value to investors "while mitigating risk during times of market stress."
Like most arbitrage funds, ACFIX is designed to provide low correlation to traditional asset classes, with less volatility. The fund's ability to maintain its value during the extremely volatile credit markets in the first month of 2016 demonstrates that it's hedging, risk management, and tactical cash tools are effective, according to Rob Ryon, the leader of Water Island Capital's Credit Team.
The fund is unconstrained by a benchmark and invests broadly across the sub-sectors of credit securities: corporate bonds, bank loans, convertibles, and preferred stock. Its investment objective is to provide current income and capital growth through a long/short approach that utilizes capital-structure arbitrage, merger arbitrage, and convertible arbitrage to capitalize on security mispricings and inefficient markets.
"This Strategy fills a very unique niche in the fixed income space and is well-positioned to take advantage of some of the dislocations that are occurring in the market today," said Gregg Loprete, who has been a portfolio manager of the fund since its inception and has more than 25 years of investment experience. "Our proprietary credit analysis is supplemented by research by our colleagues on the Merger Arbitrage and Equity Special Situations teams. Those team members have extensive experience and are among the best known investment professionals in the event-driven space."
Shares of the fund are available in institutional (ACFIX), retail (MUTF:ARCFX), C (MUTF:ARCCX), and A (MUTF:AGCAX) classes, with respective net-expense ratios of 1.25%, 1.50%, 2.25%, and 1.50%. The minimum initial investment for institutional-class shares is $100,000. The minimum for all other share classes is $2,000.
Past performance does not necessarily predict future results.
Jason Seagraves contributed to this article.