Alpha Strategy Commentary: As at March 31, 2025
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In an environment marked by persistent volatility and geopolitical noise, our Alpha strategy continues to deliver uncorrelated returns in the past quarter—reinforcing its role as a core diversifier in a well-constructed portfolio.
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We’ve been progressively adding to our Long-Short Credit and Arbitrage allocations, where near-term opportunities appear, while maintaining conviction in Equity Market Neutral strategy amid attractive market dispersion.
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The Picton Mahoney Fortified Alpha Alternative Fund Class F returned 0.98% in Q1 2025, with positive contributions from Arbitrage and Long-Short Credit — highlighting the benefit of a multi-strategy approach.
Our 2025 outlook called for a decisive shift toward diversifiers, citing persistent risks across traditional asset classes. Against this backdrop, our Alpha strategy continues to serve as a core component of our 40/30/30 portfolio construction framework, offering investors access to uncorrelated return streams that help mitigate volatility and reduce reliance on traditional market beta.
Recent market action—characterized by indiscriminate selling and tariff-related uncertainty—has only reinforced the importance of a diversified approach. While headline optimism may flare up intermittently, we believe the underlying volatility is unlikely to abate. These are uncertain times, and they demand better portfolio ballast. Our approach of assembling resilient, independent return streams has proven effective in navigating this landscape.
Notably, different underlying strategies have contributed to performance at different times—underscoring the foundational case for diversification within alternatives.
The portfolio has maintained an overweight to Equity Market Neutral strategy, reflecting our managers’ conviction that current levels of dispersion continue to offer long-short stock pickers a very rich hunting ground to demonstrate alpha.
That said, we have been gradually reallocating from Equity Market Neutral strategy into Long-Short Credit strategy, and, more recently, Arbitrage strategy, —as we see mean-reversion opportunities and thus, attractive risk/reward dynamics.
Although our Arbitrage strategy remains underweight relative to target, we’ve been increasing exposure to allow the allocation to revert toward historical return potential. This tilt reflects a broader intent to balance the portfolio across alpha sources, while positioning to navigate a fluid market environment which continues to beg for diversification.
Regarding hedging, our Alpha strategy maintains a constant allocation to market “tail risk” hedges. During this period, we did not feel the need to materially increase those exposures, as the underlying strategies were appropriately sized to achieve performance from heightened levels of implied volatility in the marketplace.
For investors new to alternatives or building exposure gradually, we continue to view this strategy as a strong foundational piece of the alternative sleeve in a well-diversified portfolio. A progressive allocation approach may help investors optimize risk/return trade-offs in the context of their broader holdings.
The Picton Mahoney Fortified Alpha Alternative Fund Class F (“the Fortified Alpha Fund”) produced a return of 0.98% in the first quarter of 2025, delivering performance in line with expectations, with low realized volatility and steady return contribution through a turbulent quarter.
Arbitrage strategy was the most consistent positive contributor during the period, despite being underweight—reinforcing its role as a stabilizer in volatile markets. The merger arbitrage strategy was supported by the successful completion of several large deals. SPAC exposures also added modestly to returns. In addition, our high-delta convertible bond arbitrage positions contributed, as the broader market sell-off created opportunities for premium expansion. These synthetic put-like exposures remain a valuable source of mitigation of downside risk during periods of stress.
Our allocation to the Long-Short Credit strategy also contributed positively to performance, with event-driven positions benefiting from idiosyncratic catalysts that played out during the period. Overall, the strategy continued to demonstrate its role as a reliable diversifier, helping investors cushion drawdowns while reducing the level of risk required to participate in market recoveries.
Equity Market Neutral strategy was subject to a bit of momentum style unwind in the quarter, but an overarching focus on quality factors held the fund in very well, especially as the trade rhetoric heated up. As contributions to return shifted in the quarter, we highlight this as a proof statement for an ongoing focus on diversification within the Fund.
Performance as of March 31, 2025 (%) | 1M (%) | 3M (%) | 6M (%) | 1YR (%) | Since Inception* (%) |
Picton Mahoney Fortified Alpha Alternative Fund (Class F) | 0.02 | 0.98 | 3.97 | 9.93 | 5.28 (2022-05-03) |
(*) refers to average annualized performance.
Disclosure
This material has been published by Picton Mahoney Asset Management (“PMAM”) as at April 22, 2025. It is provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable, however, the accuracy and/or completeness of the information is not guaranteed by PMAM, nor does PMAM assume any responsibility or liability whatsoever. All investments involve risk and may lose value. This information is not intended to provide financial, investment, tax, legal or accounting advice specific to any person, and should not be relied upon in that regard. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.
This material may contain “forward-looking information” that is not purely historical in nature. These forward-looking statements are based upon the reasonable beliefs of PMAM as of the date they are made. PMAM assumes no duty, and does not undertake, to update any forward-looking statement. Forward-looking statements are not guarantees of future performance, are subject to numerous assumptions and involve inherent risks and uncertainties about general economic factors which change over time. There is no guarantee that any forward-looking statements will come to pass. We caution you not to place undue reliance on these statements, as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made.
Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Alternative mutual funds can only be purchased through a registered dealer and are available only in those jurisdictions where they may be lawfully offered for sale.
There is no guarantee that a hedging strategy will be effective or achieve its intended effect. The use of derivatives or short selling carries several risks which may restrict a strategy in realizing its profits, limiting its losses, or, which cause a strategy to realize or magnify losses. There may additional costs and expenses associated with the use of derivatives and short selling in a hedging strategy.
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