Special Situations/Low Beta

Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.
— Warren Buffet

Special situations is an asset class where we attempt to take advantage of short-term anomalies in the market and seek absolute returns that are uncorrelated with the wider equity market. For example, market anomalies occasionally present themselves in takeovers where the price of the target company does not rise to the bid price (less the time cost of money). Bid arbitrage occurs in times of high market volatility and presents very attractive risk/return profiles. Alternatively there may be a specific event that will trigger a rise in the share price.

Low beta investments have low correlations with the wider stock market and therefore may not fall during periods of market corrections.

Our past stock selection has included:

COMPANY	SECTOR	RATIONALE
GCP Student Living Plc	Real Estate Investment Trusts	Provides exposure to student homes. Has a low beta (0.05) and yields >4%
Impact Healthcare REIT	Real Estate Investment Trust	Provides exposure to care homes. Has a low beta (0.09) and yields >5%
JLEN Environmental Assets	Equity Inv Instruments	Alternative energy company with a low beta (0.08) and yields >6%
Regional REIT	Real Estate Investment Trust	Trades at a discount to NAV with a >7% yield
Standard Life Private Eqty	Private Equity	Provides exposure to private equity. Has a low beta (0.44) and yields >3.5%

These shares can be bought with a very short term time horizon or longer for low beta investments.

For investors with a higher risk tolerance, we can manage between 12.5% and 50% of the alternatives allocation in options.