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Candriam Team’s 14 Years of Merger Arbitrage UCITS

Gauging ESG and deal break risks

Fabienne Cretin and Stéphane Dieudonné moved from OFI Asset Management to Candriam along with their merger arbitrage strategy and UCITS fund in 2018. Candriam is the third corporate parent for the duo, who have worked together since 2004, and were at ADI Alternative Strategies before OFI. France ranks as the fourth largest centre for hedge fund assets under management in Europe, according to Preqin’s 2017 survey. Fabienne was lured to Candriam partly because she expects to benefit from various aspects of its platform.

Candriam, which is managing EUR 121 billion as of September 2018, operates autonomously as part of New York Life Investment Management (NYLIM). It has been running alternative UCITS strategies since the 1990s. Candriam’s alternatives single strategy range includes: long/short credit; long/short equity; equity market neutral; index arbitrage; quantitative equities; managed futures; global macro; unconstrained asset allocation; convertible bonds; corporate credit; unconstrained bonds, and the merger arbitrage strategy, which is called “risk arbitrage”.

Fabienne is exploiting positive synergies with other teams at Candriam, including its credit team, who manage strategies that have received The Hedge Fund Journal’s ‘UCITS Hedge’ awards. “We sit right next to the credit desk, who run over EUR 7 billion in high yield, and often finance some of the merger deals we are invested in”, she says. “They keep us informed about whether deal financings have closed, and could give us an early warning signal of problems in the credit markets.” As of November 2018, credit spreads have widened, as have deal spreads on LBO and MBO mergers, but Fabienne has not noticed any deals failing due to being unable to get away financing, and is still, selectively, invested in some deals that involve financing.

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