Episode 21: Catalyst-Driven Credit - 2023 Outlook
In this episode, Portfolio Manager Gregg Loprete provides a brief recap of 2022 performance, his expectations for fixed income markets in 2023, and how our catalyst-driven credit strategy may suit investors seeking diversification.
[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. Diversification does not guarantee against a loss.
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 (“Agg”) covers the U.S. investment grade fixed rate bond market. The ICE BofA U.S. High Yield Index (“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. Index performance is not intended to, and does not, parallel the risk or investment style of the fund’s investment strategy.
Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade – typically rated BBB or better – is a rating that indicates that a bond has a relatively low risk of default. High yield – typically rated BB or worse – refers to bonds with a credit rating lower than investment grade and are perceived to have a relatively higher risk of default.
View the Water Island Credit Opportunities Fund’s standardized returns. Performance through 12/31/22: ACFIX (I class), -2.72% (one year), 2.89% (five year), 2.64% (ten year); Bloomberg U.S. Aggregate Bond Index, -13.01% (one year), 0.02% (five year), 1.06% (ten year); ICE BofA U.S. High Yield Index, -11.22% (one year), 2.12% (five year), 3.94% (ten year). 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. For performance data current to the most recent month end, visit http://arbitragefunds.com or call (800) 295-4485. Returns shown above include the reinvestment of all dividends and capital gains. Returns greater than one year are annualized. Performance varies by share class. Total Annual Fund Operating Expense for ACFIX is 1.37%. The fund has entered into an Expense Waiver and Reimbursement Agreement whereby the adviser has contractually agreed to limit the total annual operating expenses of the fund so that they do not exceed 0.98% for ACFIX, 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. The agreement remains in effect until September 30, 2023, unless terminated at an earlier time by the Board of Trustees. 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); active management risk; credit risk; convertible security risk; liquidity risk; market risk; sector risk; interest rate risk; short sale risk; 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; temporary investment/cash management risk; swap risk; options risk; preferred security risk; investment company and ETF risk; derivatives risk; LIBOR rate risk; currency risk; and foreign securities risk. Risks may increase volatility, increase costs, and lower performance.