Globe Arbitrage/Special Situation

Fund Overview

Globe Arbitrage Strategy aims at investing in low risk strategies based on arbitrage opportunities.

It also aims at investing in various special situations in the market, based on corporate events and actions, which offer unique opportunities to earn an additional return without having to take on additional risk.

The strategy would make use of equity and derivatives to augment returns in a relatively lower risk manner and to hedge against abnormal markets movements.

Fund Management Process

1. Investor’s Profile

• Portfolio structuring based on investor’s risk profile and investment objectives
• Determining Risk Appetite
• Setting Return Expectation
• Investment Horizon
• Understanding Liquidity Requirements

2. Investment Process

• Idea Generation
• Idea Evaluation and Selection through back testing
• Arbitrage/Special Situations and other Market opportunity decisions are taken as and when the opportunity arise
• Idea Execution
• Active Monitoring and Risk Management
• Exit strategy

3. Reporting

• Monthly reports with Portfolio Statements and Valuations
• Regular interaction with clients with respect to account performance
• Annual Tax reports
• Meetings with fund managers to understand future outlook

Special Situation Investing

Special Situation aims at generating returns by exploiting market inefficiencies and other low risk opportunities by using various strategies such as Cash Future Arbitrage, Covered Calls/Puts, Pair Trading and tries to benefit from event arbitrage involving merger & acquisitions, Open Offers, takeover, de-listing and other special situations.

Focus is mainly on those companies transforming their capital structure, organization or taking place of an event as opposed to focus on operations.

Uncorrelated returns – tend to be less correlated to the market.

Less vulnerable to Interest Rates – Special situations often depend on an event that is between 6 months and 1 year i.e. relatively near term, thus not as vulnerable with Interest rate movements.

Investment Approach

Principle Protection

• Fixed Deposits
• Liquid Fund
• Other Debt Instruments

Sustainable Return Generation

• Cash – Future Arbitrage
• Merger – Demerger Arbitrage
• Dividend Arbitrage
• Buy and Hold – Equity
• Use of derivatives

Special Situations for Alpha Generation

• Buybacks
• Delisting
• Open Offer
• Offer For Sale

Open Offer

It is aimed at providing the shareholders an exit option, as there may be a management change post acquisition and investors may or may not like to continue with the change in management.
Example:
1. Open offer in Escorts Ltd. By Kubota Corp @ INR 2000/- from the Public shareholders whereas the market price was INR 1800/- ( So one could tender the shares @ 2000 in open offer and sell the rest in the market or can hedge with future also )

2. Open offer in Vedanta Ltd by Vedanta Plc @ INR 235/- when the market price was INR 225 /- and there was 100% acceptance ratio.