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Arbitrage Event-Driven Fund Rated 5-Stars Overall by Morningstar

July 21, 2014

NEW YORK--(BUSINESS WIRE)-- Water Island Capital, the advisor to the Arbitrage Family of Funds, is proud to announce that as of June 30, 2014, the Arbitrage Event-Driven Fund (AEDNX I shares) has been rated 5-Stars Overall out of 94 market neutral funds by Morningstar based on risk-adjusted returns performance. Morningstar’s Overall rating takes into account a fund’s risk, volatility and returns with the top 10% of funds awarded 5-Stars. This follows the 5-Star (out of 94 market neutral funds) 3-year rating based on risk-adjusted returns (as of 6/30.2014).

“We are pleased for the recognition awarded to the Arbitrage Event-Driven Fund. When we launched the fund to the public nearly four years ago, we felt confident that we could effectively deploy an investment approach long used by institutional investors to manage risk and volatility in a mutual fund format,” said John Orrico, Founder, CEO and Chief Investment Officer of Water Island Capital.

The Arbitrage Event-Driven Fund, introduced October 1, 2010, seeks to capitalize on mispricings in stocks or bonds caused by a catalyst, including activist investors, regulatory changes and/or corporate actions, such as spin-offs. To deliver returns with lower volatility than most market indices, the strategy takes long and short positions to isolate relative price differences across the capital structure, sectors, and geographies. The portfolio is also actively managed to hedge unwanted exposure to equity, credit, interest rate, or volatility risk and is diversified across market capitalization, industry sectors and events.

Water Island Capital is a privately-owned asset management firm focused-solely on event-driven investment strategies with nearly $4 billion under management as of June 30, 2014. Water Island launched the mergers and acquisition-focused Arbitrage Fund in 2000. The Arbitrage Fund is currently (as of 06/30/14) rated 4-Stars Overall out of 94 US-domiciled market neutral funds by Morningstar based on risk-adjusted returns performance and has a Bronze Morningstar Analyst Rating. Water Island also advises the Arbitrage Credit Opportunities Fund, an event-driven, credit portfolio introduced in 2012.

For more information about Water Island Capital, the Arbitrage Funds family or the Arbitrage Event-Driven Fund, visit our website or call 800-295-4485.

For press inquiries, contact Pablo Galarza,, 917-475-9261.

Important Information

For each fund with at least a three-year history, Morningstar calculates a Morningstar RatingTM metric each month by subtracting the return on a 90-day U.S. Treasury Bill from the fund’s load-adjusted return for the same period, and then adjusting this excess return for risk. The top 10% of the funds in each broad asset class receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The Overall Morningstar RatingTM for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar RatingTM metrics.

The Morningstar Analyst Rating is not a credit or risk rating. It is a subjective evaluation performed by the mutual fund analysts of Morningstar, Inc. Morningstar evaluates funds based on five key pillars, which are process, performance, people, parent, and price. Analysts consider quantitative and qualitative factors in their research, and the weighting of each pillar may vary. Morningstar’s analysts use this five pillar evaluation to identify funds they believe are more likely to outperform over the long term on a risk-adjusted basis. Analysts consider quantitative and qualitative factors in their research, but the assessment and weighting of each of the five pillars is driven by the analyst's overall assessment and overseen by Morningstar’s Analyst Rating Committee. The approach serves not as a formula but as a framework to ensure consistency across Morningstar's global coverage universe.

The Analyst Rating scale ranges from Gold to Negative, with Gold being the highest rating and Negative being the lowest rating. A fund with “Gold” rating distinguishes itself across the five pillars and has garnered the analysts’ highest level of conviction. A fund with a “Silver” rating has notable advantages across several, but perhaps not all, of the five pillars strengths that give the analysts a high level of conviction. A “Bronze” rated fund has advantages that outweigh the disadvantages across the five pillars, with sufficient level of analyst conviction to warrant a positive rating. A fund with a “Neutral” rating isn’t seriously flawed across the five pillars, nor does it distinguish itself very positively. A “Negative” rated fund is flawed in at least one if not more pillars and is considered an inferior offering to its peers.

As of 6/30/14, Arbitrage Event-Driven Fund (AEDNX) was rated against the following numbers of U.S.-domiciled market neutral funds over the following time periods: 5-stars out of 94 funds in 3-year period ranking, and 5-stars in the Overall period ranking.

As of 6/30/14, Arbitrage Fund (ARBNX) was rated against the following numbers of U.S.-domiciled market neutral funds over the following time periods: 3-Stars out of 94 funds in 3-year period ranking, 3-Stars out of 56 funds in the 5-year period ranking, 4-Stars out of 24 funds in the 10-year period ranking, and 4-Stars in the Overall ranking. The Arbitrage Fund rated Bronze since 05/13/2013. Analyst Ratings are reevaluated every 14 months.

Past performance is not a guarantee of future results.

An investor should consider the investment objectives, risks, charges and expenses of the Funds carefully before investing. The current prospectus contains this and other information about the Funds. To obtain a prospectus, please call (800) 295-4485 or visit our website at Please read the prospectus carefully before investing. There is no guarantee the Funds will meet their stated objectives.

RISKS: The Funds use investment techniques with risks that are different from the risks ordinarily associated with equity investments. Such techniques and strategies include merger arbitrage risks, high portfolio turnover risks, options risks, borrowing risks, short sale risks, non-diversification risks, and foreign investment risks, which may increase volatility and may increase costs and lower performance. The Arbitrage Event-Driven Fund also invests in debt securities, which may decrease in value as interest rates increase. Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.

The Arbitrage Fund seeks to achieve capital growth by engaging in merger arbitrage. The Arbitrage Credit Opportunities Fund seeks to provide current income and capital growth. The Arbitrage Event-Driven Fund seeks to achieve capital growth.

Each of the Funds may change its investment objective without shareholder approval.

Distributed by ALPS Distributors Inc., which is not affiliated with the Advisor or any other affiliate. [ARB000547 2014-12-31]


For Water Island Capital

Pablo Galarza, 917-475-9261

Source: Water Island Capital

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