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Digital Subscriptions > The Hedge Fund Journal > Issue 141 – Jun | Jul 2019 > PSAM


Decades of trading corporate events
(L-R): Peter Faulkner, Caroline Greenwald, Peter Schoenfeld and Dan Phai.

Over the 22 years since Peter Schoenfeld founded P Schoenfeld Asset Management LP (PSAM) in 1997, capital has been dynamically allocated across its three main investment strategies – merger arbitrage, stressed and distressed credit and global special situations – each focused on hard, defined event characteristics.

“We strive to be the ‘go-to’ manager for an investor’s allocation to the event driven strategy. The common theme across everything we do is the transformation of the capital structure of a company – we invest in change. Our overall success depends on our ability to produce consistent returns with low correlation to equity markets and we have worked to hone and refine a proven, tested and consistent process that is clearly reflected in our return stream,” says Caroline S Greenwald, Co- Managing Member and a Managing Partner.

“Over the years we have constructed a platform of offerings and have customised investment programs according to the needs of our clients, including commingled Cayman funds, a UCITS program, managed accounts and co-investments.”

Against a backdrop of geopolitical uncertainty mid-2019, carefully selected hard catalyst names make up the bulk of the portfolio today.

Merger arbitrage

Despite various headwinds, 2018 was a vintage year for M&A – the third largest ever with $4.2 trillion of announced deals globally – according to Schoenfeld, who was a proprietary event-driven trader at banks for 20 years before founding PSAM. “This activity was partly due to pension funds and private equity firms more actively initiating control investments. They most recently include Dutch pension fund PGGM in Europe, giant pension funds in Canada and leveraged strategic infrastructure investors such as BrookField.”

Merger arbitrage generally carries a heavy weighting in PSAM portfolios and serves as the ballast due to the idiosyncratic nature of the strategy. Merger spreads, in some cases, have moved wider due to political and regulatory risk. “US and China are the most obvious focus of concern,” observes Schoenfeld. “China had been an active acquirer in the last four or five years, focused on oil and technology, but recently technology has been under close scrutiny in many countries, influenced by the US’ concerns and some acquisitions have been blocked. The recent Huawei focus has exaggerated the impact. It is not only the expanded remit of CFIUS [The Committee on Foreign Investment in the United States] for inbound US acquisitions that has been impacted, but China’s antitrust agency SAMR has also hindered purchases of companies with significant revenues locally. The NXP Semiconductors/Qualcomm deal last year was the most high-profile casualty of the Chinese authority’s reach.” Schoenfeld sees some risk of the EU becoming more protectionist, too. “Europe has already sought to protect its technology sector from US dominance and this tendency may have further to go,” he predicts. Though there have been no official changes in competition policy, the zeitgeist of politics is moving in a xenophobic direction with far-Right nationalist political parties getting more votes. There will also likely be a change to the [EU] Commissioner of Competition.

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