Eric Robbe: 2016 was challenging to say the least. Remember that just 1 month and a half after the beginning of the year, the Eurotsoxx50 was down 18%!
The Portfolio Managers adopted a cautious stance for the second part of the year as by experience the political risk is the most difficult to assess and can imply temporarily an increase of the spreads’ volatility. Rather than suffering from it the idea was to have cash available to benefit from temporary widening of arbitrage spreads. Eventually, from June to December even though the worst of possible outcomes materialized - the Brexit, Trump’s election and the no to the Italian Referendum - the equity market trended upwards and the arbitrage spreads tightened.
We have no regrets on our investment decision as our first mandate is to protect the capital invested in our funds.[/infoBox]
Eric Robbe: At Laffite Capital, the Portfolio Managers have been constantly reviewing, correcting and enhancing our tools, databases and investment processes over 22 years. And they posted 21 years of positive performance. Both funds were positive in January and February, proving once again that the funds that we are managing are uncorrelated to the bonds and the equity markets.
Overall Laffitte Diversified Return - multi-arbitrage equity market neutral fund – had a positive performance of +2.76% in 2016 with a 1% volatility.
And Laffitte Risk Arbitrage - announced merger arbitrage in Europe and North America – posted a gain of +1.64% with volatility at 1.42%.[/infoBox]
Eric Robbe: By design the investments performed at Laffitte Capital Management are not dependent on global macro bets. Our investment philosophy is to detect temporary equity market inefficiencies and benefit from them. What matters is to find enough good arbitrage opportunities, not anticipating correctly some market moves.
The corporate actions activity, including M&A, will be strong in 2017. The main reason is that the combined firepower from corporate cash, re-leveraging and private equity dry powder tops $4 trillion. The low interest rate environment - that is likely to persist for a while - makes transactions accretive much more easily as well. And Trump’s election could magnify this wave.
Notably, meeting the demand from investors for an investment vehicle with a higher risk-reward profile, we launched Laffitte Dynamic Strategies in October 2016. This uses all the existing engines of performance of the two other funds and targets 6-10% p.a. with volatility around 5%. Laffitte Dynamic Strategies received €20 million in acceleration capital from Emergence, the seeder of the Paris financial centre.