Skip to main content

GAM Multistock - Merger Arbitrage

GAM Multistock - Merger Arbitrage is a global equity risk arbitrage fund aiming to generate money market-plus returns with low correlation to equity markets. The core of the portfolio invests in low-risk merger arbitrage deals across a global universe, while tactically investing in other risk arbitrages outside of M&A.

Our Edge

Small- to mid-cap focus

The fund’s bias towards small- and mid-cap deals, which are typically less crowded and with higher spreads than in the large-cap space, enhances risk-adjusted return potential.

Discretionary approach to instrument selection

Payoff analysis seeks to select the most profitable instruments for implementation, thereby optimising the risk/return payoff for each position.

Strict focus on risk management

To minimise downside risk, the manager maintains strict concentration limits, avoids speculation on unannounced events and hedges all currency risk.

Investment Team

The fund is managed by Albert Saporta, supported by David Goodman, Investment Manager.

As the fund’s manager, Albert Saporta is ultimately responsible for research, portfolio management and trading decisions, and the first line of portfolio risk management. Two additional layers of independent risk oversight are performed by GAM’s risk teams.

We believe that a diversified and conservative risk arbitrage strategy can deliver attractive risk-adjusted returns independent of market direction.

Philosophy and Process

Investment Philosophy

The manager believes there are exploitable price inefficiencies in M&A situations. Following an acquisition announcement, investors typically sell the target company, choosing to lock in gains and forego the relatively small remaining upside. By taking a contrarian position, the manager seeks to capture the spread between the target’s current share price and deal price. The merger arbitrage risk is predominantly idiosyncratic and can therefore be effectively diversified. The manager believes that by simultaneously holding a high number of positions and selecting M&A situations with the most rewarding risk/return profile in the low spreads’ space, attractive risk-adjusted returns can be delivered independent of market direction.

Investment Process

The manager uses a bottom-up approach to identify suitable deals across a diversified global universe. Quantitative and qualitative selection narrows approximately 2,000–3,000 merger arbitrage deals per year to 200-300 potential investments. The manager conducts payoff analysis by establishing the deal closing horizon and calculating the expected return, while proprietary tools determine if this return can be enhanced through the use of options. Based on this analysis, the manager selects the most profitable structure for each deal. The resulting portfolio is diversified across 60-80 positions. The merger arbitrage strategy is the core allocation (approximately 80–90%) with the remainder comprised of tactical allocations in spin-offs and index reviews.


Universe screening

  • Global universe; market cap >USD 200 million
  • Just announced M&A deals
  • Focus on deals with 2-5% arbitrage spread

Position setup

  • Merger arbitrage – long only or long/short positions; options
  • Spin offs – buy shares and sell index derivatives or basket of shares
  • Index reviews – buy/sell shares and sell/buy index derivatives

Portfolio and risk management

  • Strict concentration limits
  • Hedge currency risk
  • Sell M&A deals with spreads below Libor

Reasons to Invest

Compelling fixed income alternative

In an environment of low interest rates and credit-spread compression, the harvesting of merger arbitrage premiums can provide alternative sources of meaningful yield with low volatility.

Stable return profile

The team seeks to focus on medium/low spread merger arbitrage opportunities, rather than higher risk deals, thereby aiming to limit the fund’s downside risk and deliver a stable return profile.

Enhanced opportunity set

Tactical investment in spin-offs and index reviews provides access to additional uncorrelated sources of alpha, in a bid to increase portfolio diversification and enhance the overall return profile.

Portfolio diversifier

The fund has low correlation to overall market movements given that its major risk and return driver is the completion of M&A deals.

Key Risks

Counterparty Risk / Derivatives

If a counterparty to a financial derivative contract were to default, the value of the contract, the cost to replace it and any cash or securities held by the counterparty to facilitate it, may be lost.

Leverage Risk

Derivatives may multiply the exposure to underlying assets and expose the Fund to the risk of substantial losses.

Currency Risk

The value of investments in assets that are denominated in currencies other than the base currency will be affected by changes in the relevant exchange rates which may cause a decline.


Investments in equities (directly or indirectly via derivatives) may be subject to significant fluctuations in value.

Capital at risk

All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.


GAM Star (Lux) SICAV – Merger Arbitrage is a sub-fund of GAM Star (Lux), domiciled in Luxembourg, registered office at 25, Grand-Rue, L-1661 Luxembourg, each an umbrella company.