Arbitrage RARBFX

Morningstar Rating

Fund Research and Analysis

by Nadia Papagiannis, CFA

Arbitrage Fund continues to impress.

This fund and its cheaper institutional share class ARBNX have earned 4- and 5-star Morningstar Ratings respectively in the long-short category, thanks to manager John Orrico's focus on tempering risk. Risk management Read more

Kudos

Low volatility.

Low correlation with the market, thus a good portfolio diversifier.

Small asset base allows nimble use of small caps and micro-caps.

The fund instituted breakpoints in October 2007. Read more

Risks

Expenses have been cut, but the firm could go further--the fund isn't cheap.

High turnover may lead to tax inefficiency and costly brokerage commissions.

Returns suffer when mergers fail.

The global merger and acquisition universe has grown more complex, adding to risk. Read more

Strategy

The fund invests in mergers and acquisitions. It buys the acquired company's stock while usually shorting the acquisitor, thus profiting on the spread if the deal closes. To avoid doomed mergers, management Read more

Management

John Orrico has run this fund since its inception; three other professionals assist. Todd Munn and Roger Foltynowicz have worked on the fund as analysts since 2003; Matthew Osowiecki joined the firm in 2007. Orrico was an analyst for merger-arbitrage Read more

Inside Scoop

This fund seeks to profit from mergers and acquisitions. A tiny asset base has helped this nimble offering to focus mainly on small- and micro-cap stocks. Low correlation Read more

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