Episode 12: Outlook for 2021 - Event-Driven Investing Under a New Administration

In this episode, Portfolio Manager Curtis Watkins discusses potential policy implications and event-driven investment opportunities that may accompany the Biden administration.
[Transcript]

The discussion of market trends and companies throughout this podcast are not intended as advice to any person regarding the advisability of investing in any particular security or strategy. Any securities mentioned are selected for discussion purposes only and may not represent current holdings of Water Island Capital, LLC ("Water Island") or The Arbitrage Funds. Our views, opinions, and estimates – including any forward-looking statements – are a reflection of our best judgment at the time of recording and are subject to change based on market and other conditions. Water Island is under no obligation to update or revise any such views or statements, except as required by law. Past performance is no guarantee of future results. Additional information about Water Island can be obtained from our Form ADV, which is available at adviserinfo.sec.gov. View top ten holdings. Visit the glossary for definitions of terms.

View the Water Island Event-Driven Fund’s standardized returns. View the Water Island Long/Short Fund’s standardized returns. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling (800) 295-4485. Returns shown above include the reinvestment of all dividends and capital gains. The Water Island Event-Driven Fund has entered into an Expense Waiver and Reimbursement Agreement with the fund’s investment adviser pursuant to which the adviser has contractually agreed to limit the total annual operating expenses of the fund, not including taxes, interest, dividends on short positions, brokerage commissions, acquired fund fees and expenses and other costs incurred in connection with the purchase or sale of portfolio securities, so that they do not exceed 1.69% of the fund’s average daily net assets allocable to the Class R shares, 1.44% of the fund’s average daily net assets allocable to the Class I shares, 2.44% of the fund’s average daily net assets allocable to the Class C shares, and 1.69% of the fund’s average daily net assets allocable to the Class A shares. The agreement remains in effect until September 30, 2021, unless terminated by the Board of Trustees. Class A shares have a maximum front-end sales charge of 3.25%. A deferred sales charge of up to 1.00% may be imposed on purchases of $250,000 or more of Class A shares purchased without a front-end sales charge that are redeemed within 18 months of purchase. The Water Island Long/Short Fund has entered into an Expense Waiver and Reimbursement Agreement with the fund’s investment adviser pursuant to which the adviser has contractually agreed to limit the total annual operating expenses of the fund, not including taxes, interest, dividends on short positions, brokerage commissions, acquired fund fees and expenses and other costs incurred in connection with the purchase or sale of portfolio securities, so that they do not exceed 1.69% of the fund’s average daily net assets allocable to the Class R shares and 1.44% of the fund’s average daily net assets allocable to the Class I shares. The agreement remains in effect until September 30, 2021, unless terminated by the Board of Trustees.

FUND RISKS: The funds use investment techniques and strategies with risks that are different from the risks ordinarily associated with equity and credit investments. Such risks include merger arbitrage risk (in that the proposed reorganizations in which the funds invest may be renegotiated or terminated, in which case the funds may realize losses); short sale risk (in that the funds will suffer a loss if it sells a security short and the value of the security rises rather than falls); event-driven risk; special situations risk; market risk; sector risk; hedging transaction risk; derivatives risk; LIBOR rate risk; credit risk; convertible security risk; concentration risk; special purpose acquisition companies risk; non-diversification risk; active management risk; counterparty risk; high portfolio turnover risk (which may increase the funds’ brokerage costs, which would reduce performance); interest rate risk; liquidity risk; options risk; swap risk; small and medium capitalization securities risk; investment company and ETF risk; when-issued securities risk; large shareholder transaction risk; foreign securities risk (in that the securities of foreign issuers may be less liquid and more volatile than securities of comparable US issuers, and may be subject to political uncertainty and currency fluctuations); leverage risk; currency risk; and temporary investment/cash management risk. Risks may increase volatility and may increase costs and lower performance.

SPAC RISKS: The funds may invest in stocks of, warrants to purchase stocks of, and other interests (e.g., warrants and rights) in special purpose acquisition companies or similar special purpose entities that pool funds to seek potential acquisition opportunities (collectively, “SPACs”). Because SPACs and similar entities have no operating history or ongoing business other than seeking acquisition opportunities, the value of their securities is particularly dependent on the ability of the entity’s management to identify and complete a profitable acquisition. Some SPACs may pursue acquisitions only within certain industries or regions, which may increase the volatility of their prices. An investment in a SPAC is subject to a variety of risks, including that (i) a significant portion of the monies raised by the SPAC for the purpose of identifying and effecting an acquisition or merger may be expended during the search for a target transaction; (ii) an attractive acquisition or merger target may not be identified at all and the SPAC will be required to return any remaining monies to shareholders; (iii) any proposed merger or acquisition may be unable to obtain the requisite approval, if any, of SPAC shareholders; (iv) an acquisition or merger once effected may prove unsuccessful and an investment in the SPAC may lose value; (v) the warrants or other rights with respect to the SPAC held by the funds may expire worthless or may be replaced or retired by the SPAC at an unfavorable price; (vi) the funds will be delayed in receiving any redemption or liquidation proceeds from the SPAC to which it is entitled; (vii) an investment in a SPAC may be diluted by additional later offerings of interests in the SPAC or by other investors exercising existing rights to purchase shares of the SPAC; and (viii) the values of investments in SPACs may be highly volatile and may depreciate significantly over time.