The case of arbitrage/merger funds (ARBFX, MERFX) (lip)

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Posted by Fundmentals on November 06, 2009 at 14:29:09:

I recently added some allocation to ARBFX and MERFX in my conservative taxable portfolio as low volatility, reasonably (but not entirely) major market uncorrelated funds.

The linked article on the Buffett takeover of Burlington Northern shows how these funds (or funds also using this strategy) make money.

A slow recovery with a raising market is a good environment for a lot of takeovers and mergers as the winners gobble up losers of the recession as organic growth is limited.

These funds are not to be confused with some exotic hedge-fund arbitrage strategy and will not be very flashy but will reduce the volatility of a portfolio (like bond funds) with potential for equity like gains.

Buffett Offers Possible 22% Profit to Arbitragers on Burlington

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Another related article: Fund targeting M&A deals sidesteps bear market (lip) Fundmentals 11:37:57 11/07/09 (0)
Ping Fundamentals - Why do you own both ARBFX and MERFX? ntip BY 18:54:19 11/06/09 (2)
- Good question. Diversifying idiosyncratic risk Fundmentals 19:28:16 11/06/09 (1)
  - Thanks ... BY 09:22:06 11/07/09 (0)
wait a minute! JR 14:52:45 11/06/09 (3)
- As far as I know mutual funds cannot use leverage Fundmentals 15:22:06 11/06/09 (2)
  - just be careful. JR 15:53:23 11/06/09 (1)
    - Fair warning! :-) (nmt) Fundmentals 16:05:34 11/06/09 (0)
Meant to say "The case FOR..." (nmt) Fundmentals 14:30:08 11/06/09 (1)
- Thank you both for a pleasant & informative discussion about this area (eom) catch22 18:10:58 11/06/09 (0)

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Comments: : I recently added some allocation to ARBFX and MERFX in my conservative taxable portfolio as low volatility, reasonably (but not entirely) major market uncorrelated funds. : The linked article on the Buffett takeover of Burlington Northern shows how these funds (or funds also using this strategy) make money. : A slow recovery with a raising market is a good environment for a lot of takeovers and mergers as the winners gobble up losers of the recession as organic growth is limited. : These funds are not to be confused with some exotic hedge-fund arbitrage strategy and will not be very flashy but will reduce the volatility of a portfolio (like bond funds) with potential for equity like gains.

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Comments:	: I recently added some allocation to ARBFX and MERFX in my conservative taxable portfolio as low volatility, reasonably (but not entirely) major market uncorrelated funds. : The linked article on the Buffett takeover of Burlington Northern shows how these funds (or funds also using this strategy) make money. : A slow recovery with a raising market is a good environment for a lot of takeovers and mergers as the winners gobble up losers of the recession as organic growth is limited. : These funds are not to be confused with some exotic hedge-fund arbitrage strategy and will not be very flashy but will reduce the volatility of a portfolio (like bond funds) with potential for equity like gains.
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