Next-Finance : Can you introduce us to Syquant capital?
Xavier Morin : Founded in 2005, Syquant Capital is an independent French management company whose managers share more than 30 years of common experience in the capital markets. We are a total of 37 people based in Paris. Our goal is to deliver consistent performance with low correlation to equity markets by focusing on investment opportunities related to corporate events and corporate actions.
How do investors view so-called absolute return funds today? The promise of decorrelation was not always there ...
Although the asset class may have been roughed up in March 2020, the Helium funds met their performance targets last year. In 2021, we are seeing a real resurgence of interest in our strategies that are weakly correlated to the equity market, with a top exit from the COVID crisis marked by a lot of corporate events. Indeed, the Covid 19 constitutes a " change of regime " where companies embark on many strategic adaptation / development operations: merger, acquisition, restructuring, issue of shares and bonds, sale of activity, IPO, SPAC etc. By way of illustration, the first quarter of 2021 constitutes a record quarter in terms of the announcement of M&A operations.
What are your main funds and your main investment strategies ?
The Helium funds are all managed around a common base of strategies and are distinguished by their different risk / return profiles depending on the leverage used. With respect to our equity funds, the Helium Fund and Helium Opportunities fund present the most cautious profile with a volatility objective of 2%. Helium Selection is the most dynamic with a volatility target of 5%. Helium Performance falls between these two profiles. We are currently highlighting the Helium Selection fund, the most dynamic fund in the Helium range which best expresses our convictions in an environment that we consider favorable for our strategies.
The capital allocation is managed dynamically between our merger arbitrage strategy (on announced mergers and acquisitions) and a second strategy called Event Driven which brings together all other corporate events / arbitrage situations. Sixteen specialists from the investment management team and cover the various opportunities present in the US and European equity markets.
We are currently highlighting the Helium Selection fund, the most dynamic fund in the Helium range which best expresses our convictions in an environment that we consider favorable for our strategies.
Xavier Morin co-CIO and in charge of the Event Driven Equity division at Syquant Capital
Can you tell us more about your dividend arbitrage strategy ? In which fund is it deployed?
Dividend arbitrage is deployed in the 4 Helium equity funds mentioned above. The aim of this strategy is to capture discounts on Future Dividends Eurostoxx50 while limiting market sensitivity by hedging this same index. We therefore compare the market’s expectations in terms of dividend payouts for the components of the Eurostoxx50 with our own estimates. Historically, during periods of sharp decline, we observe the exaggerations of the downward revisions of dividends, which seem to us to be interesting entry points.
How did the fund behave in 2020 when many companies announced reductions or even cutbacks in dividends due to the health crisis ?
This arbitrage strategy was initiated in March 2020 during the market dislocation. The uncertainty surrounding the health crisis and the reduction or even the elimination of dividends that you mention justified a sharp downward revision of dividends. This drop was very exaggerated due to technical flows from the banks. Ultimately, for the dividends paid in 2021 for the 2020 financial year, expectations are at -20% compared to pre-crisis after having experienced a drop of -60% at the height of the crisis. Managed dynamically, dividend arbitrage was the main positive contributor to the performance of Helium funds in 2020.
Xavier Morin co-CIO and in charge of the Event Driven Equity division at Syquant Capital
- Source Syquant Capital, Bloomberg
What about the performance since the launch of this fund ? What about its Sharpe ratio ?
Since its launch on 09/29/2014, the performance of Helium Selection has been +55.4%, +6.4% annualized with a volatility of 5.2%, and a Sharpe ratio of 1.3 (as at 27-oct-2021).
What type of investors are you targeting today? CGP? French institutional investors? Foreigners?
We currently manage 2.9 billion euros. Our investor base is mainly made up of institutional investors in Europe and Asia who seek consistent and non-directional performance. In addition, we are strengthening our sales team with the arrival of a person dedicated to institutional clients abroad and a second person dedicated to IFAs in France.
Limits in terms of management capacity?
The developments made at Syquant Capital over the past three years, (i.e.) expanding the management team and increasing the number of our counterparties, has significantly increased our ability to deal more comprehensively with market opportunities and to integrate new investment strategies. It is difficult to make projections, however we think we will continue to deliver our performance targets at an AUM of 5 billion euros, versus our 2.9 billion euros today.
