Strategies
The relative value strategy is an equity-focused, market-neutral strategy employing four sub-strategies including a (i) Natural Resources Strategy, (ii) Utilities Strategy, (iii) Materials Strategy and (iv) Energy Transition Strategy (each as defined below). The Firm allocates capital across the sub-strategies by analyzing the risk and return characteristics of each individual sub-strategy, the resulting risk/reward of the combined portfolio, as well as how the current or future market environment might affect each sub-strategy. The correlations of each sub-strategy to one another and to the overall Funds are a major component of this analysis. The Firm may add additional strategies to the portfolio over time.
The relative value strategy invests in public equities both long and short within the Energy, Utilities, Materials and Alternative Energy sectors. This investment strategy employs a data-driven, fundamental stock-picking research process within a quantitative factor framework to isolate idiosyncratic risk while seeking to control market, industry and style risks. This allows the strategy to generate returns predominantly through individual stock selection, while considerably reducing overall portfolio risk. The Firm believes this to be a highly repeatable process that can deliver consistent, absolute returns.
Relative Value
The merger arbitrage strategy primarily invests in the stocks of companies involved in publicly announced mergers, tender offers, takeovers, and other corporate reorganizations. The strategy generates profits from the successful completion of the proposed transactions, capturing the small return, or spread, that typically exists after a deal’s announcement. This spread is the result of the stock of a target company trading at a discount to the eventual consideration received upon the closing of the transaction. The primary risk is related to the consummation of the individual transactions, as opposed to the overall market risk. As a result, the strategy’s return tends to be uncorrelated to traditional assets and other strategies, while the variables that compose the deal risk are measurable and quantifiable. The investment process consists of assessing the likelihood of announced transactions occurring as expected, the potential return if the transaction is consummated, and the estimated loss if the transaction failed to occur as expected or is terminated altogether.
Merger Arbitrage
The SPAC arbitrage strategy invests in the equity, warrants, rights and units of Special Purpose Acquisition Companies, or SPACs. SPACs are investment vehicles that trade on a listed exchange just as traditional equities do. The entity raises money through an IPO with the intention of consummating an acquisition at some point in the near future. Each SPAC has a pre-determined period of time to consummate an acquisition (normally 18 – 24 months). If no acquisition is closed during this timeframe, then the money from the IPO, plus any interest income generated during the life of the SPAC, are returned to current shareholders. If a SPAC does find a viable acquisition, shareholders vote on whether to approve the contemplated transaction. Shareholders also retain the right to either redeem their shares for the cash value per share held by such SPAC at the time the acquisition closes or remain as shareholders after the closing of the acquisition. The Firm does not intend for the Fund to hold any SPAC investments following the closing of any acquisitions consummated by the SPAC.
SPAC Arbitrage
Economic and market conditions vary and references to Sagefield’s risk reduction strategies and / or potential returns should not be construed to imply that we will be successful. Market events and conditions (or lack thereof) could drastically impact investment performance. Please refer to the regulatory disclosures linked below.