While 2020 may have required relentless hard work to recover from losses caused by the surreptitious arrival of COVID-19 in the first quarter, 2021 also presented its fair share of events, sometimes unusual and each requiring a response. This included social networks being used to manipulate the stock markets, with surprising and sometimes worrying results. We also saw considerable volatility in the bond markets, as the comments made by central bankers sometimes defied analysis and provoked confusion. In short, 2021 was not short on drama, all the way to the finish line.
In the last quarter, the M&A business was affected by some unfortunate and unexpected events. However, our varied strategies and many diverse positions produced a positive overall result. Here follows a closer look at how all this transpired.
Once again, the past quarter has demonstrated how the Amethyst Arbitrage Fund is well served by its diverse arbitrage strategies and the many positions it manages. Two of our three main strategies generated positive returns, resulting in a reasonable result overall.
On the other hand, some segments of our fixed income segment suffered as bond markets were dealt their fair share of chaos, to say the least. In keeping with our disciplined approach to risk management, we exercised caution, liquidating some positions where limited visibility prevented us from concluding that the risk was behind us.
As the last quarter of 2021 begins, we now find ourselves in a good position, convinced that the Fund will end the year profitably. Here follows a discussion of what happened in the third quarter and what we envision from now until the end of the year.
Even though we faced some adversity in implementing our yield curve arbitrage strategy, the fund performed well overall in the second quarter. And we are confident that, going forward, we can build on this momentum, despite a striking dichotomy between the state of the economy and financial asset valuations, the impact of having a new Democratic administration in the U.S., and the uncertainties surrounding the timing of changes to the Federal Reserve’s (the Fed’s) monetary policy. Let’s see how all of this relates to our key strategies.
Even though the financial markets were a disaster just 12 months ago, euphoria reigned in the first quarter of 2021. The markets had become fertile ground for good returns due to a new President in the White House, who brought an end to the chaos of the last few years, more than enough fiscal and monetary stimulus and, above all, a surprisingly rapid roll-out of a massive vaccination campaign. And yet...
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