Dear Unitholders,
Overall, March capped a strong quarter for global M&A, characterized by rising deal values, record mega-deal activity and increasing sponsor participation, even as volumes remained subdued. Heightened geopolitical tensions, including the US-Israel conflict with Iran, introduced additional volatility and uncertainty into global markets, which likely caused some dealmakers to pause or delay announcements, particularly for larger or cross-border transactions sensitive to macro conditions. As visibility improves and prospects for de-escalation or resolution come into view, we would expect pent-up deal activity to re-emerge, potentially supporting a continued recovery in announced transactions.
March was an eventful month with plenty of activity for the Fund following an encouraging start to the year, with a steady cadence of deal initiations and closings. While overall M&A activity remained robust at the market level, periods of volatility toward the end of the quarter led to some widening in merger spreads, which we selectively utilized to add to high-conviction positions. During the month, the Fund initiated positions in 17 new merger transactions while 14 deals held in the portfolio successfully closed, allowing capital to be recycled into newly widened spreads created by the market dislocation. Our focus remains on smaller and mid-cap transactions where we believe deal certainty is higher and competition for capital is less intense, allowing us to generate attractive risk-adjusted returns. At the end of March, the Fund held 33 active investments in small-cap deals under $2 billion, including 22 transactions valued at under $1 billion, reflecting the continued breadth of opportunity within our core focus on smaller, less complex transactions.
During the month, the Fund experienced a deal break with the proposed acquisition of LENSAR, Inc. (NASDAQ: LNSR) by Alcon Inc., which was terminated following opposition from the FTC. LENSAR is a medical technology company focused on advanced femtosecond laser systems used in cataract surgery, operating in a niche segment of the ophthalmic equipment market. Our investment thesis was that the company’s relatively small size and limited market share would not raise material antitrust concerns; however, regulators ultimately took a more stringent view of the competitive dynamics in this specialized market. While disappointing, deal breaks are an inherent part of merger arbitrage investing. Importantly, we maintain a strong long-term track record of avoiding broken deals through disciplined underwriting and rigorous risk assessment, and continue to position the portfolio to mitigate the impact of such events.
The strength in M&A activity through the first quarter has reinforced a meaningful shift in the dealmaking environment, with strategic and financial buyers increasingly active and competing for assets. This momentum is being driven by a combination of abundant capital, improving confidence and a more supportive regulatory backdrop, all of which continue to underpin a healthy pipeline of transactions. While geopolitical developments, including the conflict involving Iran, have introduced intermittent volatility, they have done little to derail the broader trajectory of rising deal activity. We are also observing a growing sense of urgency among corporates and private equity sponsors to execute transactions in the current window, supported by favorable policy conditions in the US. This dynamic, combined with a backlog of potential deals, suggests continued strength in announced activity even if short-term volatility creates occasional pauses. For merger arbitrage, these environments often lead to temporary dislocations in spreads, which can provide attractive opportunities to deploy capital into high-quality transactions.
Within SPAC arbitrage, the setup continues to improve as rising yields coincide with an increase in deal announcements. We are finding opportunities across both new issuance, where optionality is becoming more valuable, and more mature SPACs, where shorter durations and wider discounts support yield capture. In the context of elevated equity valuations and an increasingly complex macro environment, we believe a non-correlated, absolute return-focused strategy such as merger arbitrage remains a compelling allocation. With exposure to both traditional M&A and SPAC opportunities, we view the strategy as well positioned to deliver consistent returns while providing diversification benefits in periods of market uncertainty.
Amar Pandya, CFA
April 22, 2026