CELLYANT CAPITAL MANAGEMENT

CELLYANT CONVERGENCE FUND

Investment philosophy

The Cellyant Convergence Fund is a leveraged non-directional Security Financing Arbitrage Fund. The fund aims at delivering absolute performance through the implementation of delta / gamma neutral arbitrage strategies designed:

Considering its exposure and sensitivity to market movements, the Cellyant Convergence Fund intends to offer investors the asymmetric risk / reward profile of a Dynamic Money Market Fund.

Portfolio manager

  • Nicolas Hamar
  • Strategy highlights

  • Security financing
  • Delta / gamma neutral
  • Absolute performance
  • Key features

  • Regulated AIF
  • Professional investors only
  • Depo bank: CACEIS Lux
  • Strategies

    Core strategies

    Mechanical Convergence

    Theoretical Basis

    Consisting in going concurrently long and short in two different maturities on the same underlying asset, preferably by using listed derivatives.

    New shares vs. Old shares

    Consisting in simultaneously buying the new share (not entitled to dividend) and selling the old (ordinary share).

    Scrips

    Consisting in acquiring the optional right to dividend and hedging it by selling ordinary shares.

    Subscription rights

    Consisting in arbitraging the ordinary shares vs. the preferential rights.

    Dependencies

    While the profitability of core strategies is mostly dictated by access to cheap / stable borrows and financing, partnerships with counterparties secure appropriate financing / sourcing solutions.

    Allocation

    Capital / limits are allocated between strategies depending on market conditions and expected profitability. Precedence is given to fully hedged transactions and trades unwinding a pre-existing position.

    Ancillary Strategies

    Servicing

    Financing / Sourcing

    Consisting in organising access to cash and securities through listed or OTC derivatives, for the Fund own purposes or to the benefit of selected counterparties. May involve collateral upgrade strategies (e.g. borrowing debt securities to (re)finance Equity positions).

    Facilitation / Transformation

    Consisting in interposing the Fund book between two counterparties with a view to facilitating a transaction by potentially transforming it (e.g. borrowing stocks under a repo agreement and lend them via a buy / sell-back transaction).

    Position optimisation

    Consisting in offering cash / securities optimisation strategies to selected counterparties with a view to refinancing their positions, investing cash or optimising the pay-off of certain corporate actions (e.g. scrips).

    One single portfolio

    Positions resulting of both streams are aggregated and managed as a single book. This approach is the ultimate guarantee that:

  • The Fund can act as market maker in a large variety of financial instruments,
  • All optimisations are performed in a given situation,
  • Partnerships with counterparties are handled in a way to secure their long-term profitability.
  • Performance drivers

    Security financing arbitrage is fuelled by the heterogeneity of financing curves implied in each derivative transaction. Spot and term transactions being asymmetrical by nature, the term structure existing in cash or fixed income instruments can also be unveiled in equivalent equity-based instruments. However, the market profile of equity-based repo / stock loans exhibits a specific risk / reward profile, fundamentally different from the one usually encountered in bonds or money markets: besides a typical interest rate / FX sensitivity, equity borrowing / lending costs are largely affected by the short interest, the occurrence of corporate actions (dividends, capital increase, etc.) as well as the credit and tax situations of counterparties.

    Cellyant proprietary market analysis and execution routines are designed to take advantage of:

    Learn more...