Alpha Strategy Commentary: As at June 30, 2024

The Picton Mahoney Absolute Alpha Fund Class F (“the Absolute Alpha Fund”) produced a return of 3.99% in the second quarter of 2024.

The Picton Mahoney Fortified Alpha Alternative Fund Class F (“the Fortified Alpha Fund”) produced a return of 2.70% in the second quarter of 2024.

The funds continue to provide returns independent of market direction; our analysis of daily portfolio returns over the most recent time frame indicates a very small beta footprint in terms of exposure to traditional asset classes such as stocks and bonds as measured with respect to our PMAM asset classes in Q2 2024. Therefore, the funds continue to meet a key investment objective of providing returns independent of traditional asset classes.

The funds benefited from positive return contributions from all of the core active strategies as well as the Quantitative Equity Factor risk. Following strong performance in Q1, the strategy has started the year with two of the best quarterly performances since inception.

The largest contributor to positive performance in Q2 was again the Equity Market Neutral strategy, following strong performance in Q1 of 2024. While this trend of strong Market Neutral performance has extended for the second quarter, we expect the relative performance ranking of the core strategies to change over time. Looking at performance over a longer time horizon, the Alpha strategies have outperformed all of the underlying strategies over a one-year time horizon. Combining portfolio components with a positive return potential and a low correlation can result in better portfolio outcomes over moderate to long term time horizons. These portfolio construction benefits continue to accrue to investors in the Alpha portfolios.

We believe we will revert to an environment of shifting relative performance of underlying strategies. Therefore, maintaining a balanced exposure across the underlying components of the funds is an important feature of the portfolio management process of the Alpha portfolios.

Highlight of the component strategies:

Equity Market Neutral strategy:

Positive return contribution was driven by stock selection in Financials and Information Technology sector, and overweight to Materials sector. Performance was slightly detracted by stock selection in Energy and underweight to Industrials sector.

Special Situations strategy:

This strategy was the second largest contributor to the overall strategy. With index-level credit spreads near the lower end of the historical range, the Income team believes an active, long-short, hedged approach to the credit market is especially important to dampen risk and volatility while taking advantage of the attractive yield and capital gain opportunities we see in the bond market today. Additionally, the team continues to focus on finding special situation investments that can provide uncorrelated alpha. They are increasingly attentive to headline risk and potential divergence, layering in single-name shorts and using the recent rally in risk assets to rebalance hedges given macroeconomic uncertainty and expensive credit valuations.

Arbitrage strategy:

The strategy also contributed positively in the quarter. It was a relatively slow quarter for arbitrage strategies. Several mergers received second requests, thereby lengthening their deal timelines and reducing merger arbitrage returns. New deal activity picked up towards the end of the quarter, notably in Canada where we had three significant deals announced. For the first time in a long time, the Special Purpose Acquisition Company (“SPAC”) market saw net growth in Q2. Ten SPACs were issued, raising US$1.8 billion, roughly double the activity of the last few quarters.

 

Performance as of June 30, 2024 (%) 1M (%) 3M (%) 6M (%) 1YR (%) 3YR (%) Since Inception* (%)
Picton Mahoney Absolute Alpha Fund (Class F) 1.26 3.99 8.22 11.65 6.14

6.19

(Jan. 29, 2021)

Picton Mahoney Fortified Alpha Alternative Fund (Class F) 0.77 2.70 6.87 10.25

6.80

(May. 3, 2022)

 

(*) Annualized performance

 

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This material has been published by Picton Mahoney Asset Management (“PMAM”) on July 11, 2024

It is provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable, however, the accuracy and/or completeness of the information is not guaranteed by PMAM, nor does PMAM assume any responsibility or liability whatsoever. All investments involve risk and may lose value. This information is not intended to provide financial, investment, tax, legal or accounting advice specific to any person, and should not be relied upon in that regard. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.

This material may contain “forward-looking information” that is not purely historical in nature. These forward-looking statements are based upon the reasonable beliefs of PMAM as of the date they are made. PMAM assumes no duty, and does not undertake, to update any forward-looking statement. Forward-looking statements are not guarantees of future performance, are subject to numerous assumptions and involve inherent risks and uncertainties about general economic factors which change over time. There is no guarantee that any forward-looking statements will come to pass. We caution you not to place undue reliance on these statements, as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made.

Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Alternative mutual funds can only be purchased through a registered dealer and are available only in those jurisdictions where they may be lawfully offered for sale.

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