DIVA SYNERGY UCITS FUND - Bernheim, Dreyfus & Co.

Structure of Portfolio
Market Volatility
Investment Strategy
The investment strategy revolves around two pillars: Announced Merger Arbitrage (announced deals) and
Pre-Event Merger Arbitrage (anticipated deals)
Portfolio Structure
1. Announced Merger
Arbitrage
• Announced M&A Deals
2. Pre-Event Merger
Arbitrage
• Identify potential M&A
targets
• To achieve the target return and volatility, the allocation between
the two strategies is adjusted depending on the economic cycle
and market conditions
• 40 to 50 stocks listed in Western Europe and North America
• Market fluctuations systematically covered (Market-Neutral)
Portfolio Allocation
• The structure of the portfolio and the allocation between the
two strategies Pre-Event Merger Arbitrage and Announced
Merger Arbitrage depends mainly on the level of volatility in
the market. Higher market volatility results in higher risks
which gives larger spreads and therefore makes the
Announced Merger Arbitrage strategy more profitable than
the Pre-Event Merger Arbitrage .
• As illustrated below there is a clear correlation between the
structure of our portfolio and the market volatility. At the
end of 2008 when volatility – in terms of the VIX (1) index –
was above 40 more than 90% of the portfolio (managed by
the same team, applying the same strategy) was invested in
the Merger Arbitrage strategy.
Historical Portfolio Allocation - (managed by the same team, applying the same strategy)
Pre-Event Driven Portfolio Merger Arbitrage Portfolio VIX
100%
80%
60%
40%
20%
0%
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
60
50
40
30
20
10
0
(1) An indicator of U.S. financial markets volatility. The index is calculated by averaging the volatilities on put and call options on the S&P500.
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