Episode 20: Catalyst-Driven Credit - Mid-Year Update and Outlook
In this episode, Portfolio Manager Gregg Loprete discusses the fixed income market’s difficult start to 2022, his expectations moving forward, and how he’s positioned our catalyst-driven credit strategy for the second half of the year.
[Transcript]
An investor should consider the investment objectives, risks, charges, and expenses of the funds carefully before investing. The current prospectus contains this and other information about the funds. To obtain a prospectus, please visit http://arbitragefunds.com/ or call (800) 295-4485. Please read the prospectus carefully before investing. Investing involves risk, including potential loss of principal.
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.
ACFIX has limited availability and may not be accessible to all investors. The fund is also available in other share classes. Please see the fund’s prospectus for more details.
The Bloomberg U.S. Aggregate Bond Index (“Bloomberg Agg”) covers the U.S. investment grade fixed rate bond market. The ICE BofA U.S. High Yield Index (“ICE BofA High Yield”) measures the broad domestic high yield corporate bond market. Index returns do not reflect any management fees, transaction costs, or expenses. Index returns are for illustrative purposes only and do not represent actual fund performance. Indexes are unmanaged and one cannot invest directly in an index.
View the Water Island Credit Opportunities Fund’s standardized returns. Performance through 6/30/22: ACFIX (I class), -4.25% (one year), 2.45% (five year), 2.44% (since inception 10/1/12); Bloomberg U.S. Aggregate Bond Index, -10.29% (one year), 0.88% (five year), 1.54% (ten year); ICE BofA U.S. High Yield Index, -12.66% (one year), 1.95% (five year), 4.41% (ten year). 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. Returns greater than one year are annualized. Total Annual Fund Operating Expenses for ACFIX is 1.52%. The adviser has contractually agreed to waive fees in excess of 0.98% for ACFIX until September 30, 2022, excluding the effects of 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. Without such fee waivers, performance numbers would have been reduced.
RISKS: Investments are subject to risk, including possible loss of principal. There can be no assurance that the fund will achieve its investment objectives. The fund uses investment techniques and strategies with risks that are different from the risks ordinarily associated with credit investments. Such risks include event-driven risk; merger arbitrage risk (in that the proposed reorganizations in which the fund invests may be renegotiated or terminated, in which case the fund may realize losses); credit risk; convertible security risk; liquidity risk; market risk; sector risk; interest rate risk; short sale risk (in that the fund will suffer a loss if it sells a security short and the value of the security rises rather than falls); hedging transaction risk; large shareholder transaction risk; leverage risk; high portfolio turnover risk (which may increase the fund’s brokerage costs, which would reduce performance); counterparty risk; swap risk; options risk; preferred security risk; investment company and ETF risk; derivatives risk; LIBOR rate risk; currency 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); active management risk; and temporary investment/cash management risk. Risks may increase volatility and may increase costs and lower performance.
Water Island Credit Opportunities Fund top ten holdings as of June 30, 2022: Altice France Holding SA 10.5% 5/15/2027; GCP Applied Technologies Inc 5.5% 4/15/2026; Getty Images Inc 9.75% 3/1/2027; MoneyGram International Inc FR 7/21/2026; Peninsula Pacific Entertainment LLC / Peninsula Pacific Entertainment Finance In 8.5% 11/15/2027; Plantronics Inc FR 7/2/2025; Switch Ltd 3.75% 9/15/2028; Tenneco Inc 5.125% 4/15/2029; Twitter Inc 5% 3/1/2030; Uniti Group LP / Uniti Fiber Holdings Inc / CSL Capital LLC 7.875% 2/15/2025. Top ten holdings represent 41.6% of the portfolio. Holdings are subject to change. Current and future holdings are subject to risk.