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Maxam Arbitrage Fund – Q2 2022

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Maxam Arbitrage Fund – Q2 2022 Commentary

Dear fellow investors,

The Maxam Arbitrage Fund1 declined -0.6% in the second quarter of 2022, in what was a very challenging period for both equities and bonds.

The fund has held up very well during the market correction – demonstrating its value as an alternative source of returns and a portfolio diversifier. Over the last 12 months the fund gained +2.2% whereas the iShares Core CAD Universe Bond ETF declined -11.7%2.

Merger and SPAC arbitrage yields are attractive right now, presenting investors with an opportunity to earn returns from a strategy that is uncorrelated with traditional equities and bonds.

State of the arb market.

The overall market narrative continues to be dominated by high inflation, rising interest rates, fears of a recession and geopolitical tensions.

Arbitrage spreads widened during the quarter to levels not seen since the Covid crash in March-April 2020. In addition to tracking the broad risk-off environment, spreads were pressured by a more expensive and difficult market for high yield financings and leveraged loans.

In particular, yields on leveraged buyout transactions widened in early June when reputable private equity firm Thoma Bravo announced that they had renegotiated and reduced the price they had agreed to pay for Anaplan Inc. from $66.00 to $63.75 per share. This deal re-price remains a ‘one-off’ at time of writing with other notable leveraged buyout transactions recently closing on terms.

Also continuing to impact arbitrage spreads and deal timelines is the increased scrutiny that U.S. regulators are applying to mega-cap deals and companies in industries deemed more sensitive to competition issues. 

Despite a challenging market environment, new deal announcements continued to be plentiful during the second quarter, providing us with a robust opportunity set to take advantage of. However, while it is difficult to forecast future deal activity, we are mindful that the present risk-off nature of the markets coupled with rising interest rates and wider credit spreads may be a headwind.

Constructively, market volatility and lower valuations will lead to new opportunities for dealmakers as companies look to make strategic acquisitions and position themselves for future growth. And private equity firms have significant amounts of capital that needs to be deployed which may help temper any slowdown.


Being nimble is an advantage in terms of both seeking returns and managing risk. We enjoy the flexibility and advantage of investing across the capitalization spectrum, providing us with a larger opportunity set. While every merger deal is different, we look favourably on mid and smaller capitalization transactions in the current environment because regulatory risks are typically lower, and the deal timelines are shorter.

Regardless of deal size, we are always focused on transactions that we believe will reach successful completion.

The fund invested in 15 new deals during the quarter, had 14 successful deal closures and experienced no deal breaks (although we did own the Anaplan re-price). As of June 30, the fund held 35 merger arbitrage positions, diversified across market cap, deal type and industry.

Owned deals that successfully closed during the quarter included3: Cerner Corp; Ferro Corp; IntriCon Corporation; Intertape Polymer Group; Noront Resources; Anaplan Inc; Questex Gold & Copper Ltd; SOC Telemed Inc; Veoneer Inc; and Intersect ENT, Inc.

Some notable new positions initiated during the second quarter included3: Covetrus Inc; FAX Capital Corp; GTY Technology Holdings; Points International; Redline Communications; and Sailpoint Technologies.

SPAC yields rise.

Just as traditional IPOs are less likely to come to market during unfavourable market conditions, so too are SPACs. New SPAC issuance continued to slow during the second quarter with less than 20 new SPAC listings, a steep drop from the 54 seen in the first quarter of 20224 (and a far cry from the pace of more than 600 in calendar 2021).

In addition to the weaker market environment, the SEC’s proposed new, and more stringent, rules for SPACs (discussed in our Q1 commentary) are likely making it more difficult for SPAC sponsors to find and consummate deals. SPAC redemption rates, where investors elect to redeem their SPAC shares for the cash held in trust, continued to be high at approximately 80%, during the second quarter4.

A high rate of SPAC redemptions makes it very difficult for investors who bank merely on upside from well-received deal announcements, or for those who speculate on SPAC warrants – which will expire worthless if a deal is not completed. We continue to take a very conservative approach to SPAC warrants, routinely harvesting them post unit split, rather than hoping a deal the market likes will be completed.

From a SPAC arbitrage perspective, the risk-off environment and still well-supplied market with almost 600 SPACs currently seeking acquisitions5 provides us with a very attractive reward-to-risk set-up. SPACs are trading at unlevered annualized yields near 5% on average6 – a return that is backed by short-term government securities (i.e. T-bills) held in trust.

We also note the SPAC cliff on the horizon – almost 95% of listed SPACs are due to liquidate within the next 12 months7, presenting us with an attractive set-up for our systematic and quantitative approach to harvesting SPAC yields.

As of June 30, the fund was well-diversified across 158 SPACs, and we are currently deploying capital at attractive yields.

Looking ahead.

Merger and SPAC arbitrage yields are attractive right now, presenting investors with an opportunity to earn returns from a strategy that is uncorrelated with traditional equities and bonds.

Arbitrage is an attractive strategy for the long-term, and its unique characteristics make it a particularly attractive strategy in the current environment. Rising interest rates are a clear negative for bonds, however they can act as a tailwind for arbitrage because of the low duration nature of the strategy – deals typically complete in just a few months.

In addition to providing a compelling alternative to bonds as interest rates rise, arbitrage strategies also provide excellent diversification to traditional equity market exposure because returns are generated from the successful completion of specific and definitive corporate events. As arbitrageurs we expect to profit regardless of the behaviour and direction of the stock market.

Risk management is central to our quantitative, data-centric and disciplined investment process as we deploy capital into a robust and attractive opportunity set.

Thank you for your trust and confidence. Please don’t hesitate to reach out with any questions.


Travis Dowle, CFA
President & Fund Manager
Maxam Capital Management Ltd.

1 Maxam Arbitrage Fund, Class F, net of fees and expenses. Inception date October 1, 2020. Please contact us regarding other series of fund units or visit our website

2 iShares Core CAD Universe Bond ETF, ticker XBB.

3 Notable owned deals successfully closing during the quarter is not an exhaustive list. New positions initiated during the second quarter is not an exhaustive list.

4 SPAC statistics sourced from: Maxam internal database and


6 Maxam internal database and

7 Maxam internal database

Maxam Capital Management Ltd. is the manager for the Maxam Arbitrage Fund. Important information about the Fund is contained in the Fund’s Simplified Prospect us, which should be read before investing. This presentation is neither an offer to sell securities nor a solicitation to sell securities. Disclosed historical returns for periods greater than one year are annualized unless otherwise noted and are net of fees and expenses. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Simplified Prospectus before investing. Any indicated rates of return are the historical annual total returns including changes in value and reinvestment of all distributions and does 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. This document is not intended to provide legal, accounting, tax, or investment advice. Please consult an investment advisor and read the prospectus for the Maxam Arbitrage Fund prior to investing. Please contact us for more information at: (604) 685 0201


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Amy Chan

Office Manager

Amy is responsible for managing the administration of the office. Amy brings more than a decade of office management experience to Maxam, including previous experience in the real estate, resource and technology industries.

Jaipal Dosanjh


Jai is an Associate intern with Maxam, and his duties cover data analysis and model updating. Prior to joining Maxam, Jai worked for Scotiabank where he gained research and data analysis experience. Jai is a level I candidate for the Chartered Financial Analyst (CFA) designation and graduated from the Beedie School of Business at Simon Fraser University with a Bachelor of Business Administration degree.

Colton Cyr, CIM


Colton is an Associate with Maxam Capital Management Ltd. supporting the firm’s client relationships as well as the sales and business development initiatives. Colton comes from a wealth management background with Raymond James Ltd. and is Chartered Investment Manager (CIM®) designation holder. He earned a B. Sc. while attending American International College (Massachusetts) on a full NCAA Division 1 Hockey Scholarship and the University of Victoria.

Ben Macfadyen, CFA


Ben is responsible for managing operations and compliance for the firm. Prior to joining Maxam, Ben served as Chief Operating Officer for a Toronto-based event driven hedge fund with a focus on arbitrage strategies, and more recently as an institutional equity trader with CIBC World Markets in Vancouver. Ben holds the Chartered Financial Analyst (CFA) designation and graduated from the University of British Columbia with a Bachelor of Commerce degree (Major in Finance).

Brian Hikisch, CFA

Fund Manager

Brian joined Maxam in 2016 and holds over a decade of investment industry experience. Prior to Maxam Brian was an investment analyst at a long/short equity fund, and also worked in investment banking at National Bank Financial and Equity Research at Raymond James. Brian is a graduate of the University of British Columbia with a Bachelor of Commerce degree (Major in Finance) and holds the Chartered Financial Analyst (CFA) designation.

Travis Dowle, CFA

President & Fund Manager

Travis began his career in 1996 with MK Wong & Associates, which was later acquired by HSBC Asset Management. Travis left HSBC in 2007 to lead public market investments for a family office/private investment group, before he founded Maxam in 2009. Travis is a graduate of the University of Western Ontario, holds the Chartered Financial Analyst (CFA) designation and is a past guest instructor for Stalla’s CFA exam preparation course.