The sun feels good as you lie on the beach with your favorite cool beverage. Thinking about a recently read event-driven hedge fund article, you wonder what is the largest special situations fund? Sitting upright and grabbing your phone, you type in the web address for Event Driven Daily and this is what you learn ....
What is the Largest Special Situations Fund?
The largest special situations fund is the Liontrust Special Situations Fund. As of May 2024, the fund had $4.76 billion in assets under management (AUM). The fund was launched on November 10, 2005, in London, United Kingdom (UK) and is not publicly traded. It is managed by Liontrust Asset Management Plc, a specialist fund management company founded in 1994, and also located in London. The firm focuses on managing multi-asset equity funds and portfolios. Liontrust Asset Management is a publicly traded firm and trades on the London Stock Exchange (LSE) under the ticker LIO.
Let’s examine Liontrust Special Situations Fund’s investment strategy, risk management, portfolio composition, and performance to properly address the question; what is the largest special situations fund?
Investment Strategy – The fund’s investment strategy is unique. The firm’s strategy is focused on applying the Economic Advantage methodology to event-driven special situations. LIontrust employs in-depth research and analysis to identify and invest in companies suitable for long-term capital appreciation that possess unique intangible assets precipitating an economic moat that solidifies a durable competitive advantage.
Risk Management – Risk mitigation is a key strategy of the fund’s concentrated portfolio. Concentrated portfolios consist of a limited number of investments and carry the inherent risk of a decline in the value of one holding can significantly adversely affect the portfolio’s overall performance. The fund is a fan of small companies with limited liquidity which heightens the risk of timely position entry and exit. Fund managers use the selection of only quality companies, diligent monitoring, constant risk/reward assessment, and aggressive diversification to mitigate portfolio systematic and idiosyncratic risk.
Portfolio Composition – The diverse range of portfolio companies are primarily UK, European, and global equities (stocks). The fund has 55 portfolio holdings and here are the top five investments constituting 16.85% of the fund’s total holdings.
- RELX Plc (REL) – A provider of information-based analytics and decision solutions for North American, European, and international business clientele. Market cap (market capitalization): $85.68 billion.
- GSK Plc (GSK) – The company engages in R&D (research and development) and manufacturing of vaccines and general and specialty preventative disease treatments in the UK, United States, and internationally. Market cap: $78.84 billion.
- Shell Plc (SHEL) – Shell is an oil, gas, and consumable energy behemoth with a global footprint. Market cap: $228.56 billion.
- Compass Group Plc (CPG) – Compass Group operates as an international food and support services provider. It serves the healthcare industry, senior living market, education, sports, and defense sectors. Market cap: $46.46 billion.
- AstraZeneca (AZN) – A biopharmaceutical firm dedicated to the discovery, development, manufacturing, and delivery of prescription medications. The firm’s target market is the UK, the Americas, Asia, Africa and Australia. Market cap: $191.55 billion.
Performance - The fund’s performance is market-sensitive and should be evaluated in terms of its long-term strategy. In 2023, the fund achieved a 6.3% return, net of fees. However, its year-end return was 3.6%, falling short of its benchmark, the FTSE All Share Index, a 600-firm performance composite of Europe’s largest companies.
What is the largest special situations fund? Liontrust Special Situations Fund is the largest fund capitalizing on a unique investment approach that produces long-term capital appreciation from intangible asset-rich companies. But Liontrust is not the only power player in the special situations space; enter Oaktree Special Situations Fund.
How Big is Oaktree Special Situations Fund?
The Oaktree Special Situations Fund has $3 billion AUM. The private investment fund’s official name is the Oaktree Special Situations Fund III and is located in Los Angeles, California. Launched in 2023, the $3 billion capital raised was 30% more than its previous $2.5 billion fund, the Oaktree Special Situations Fund II.
The fund is managed by Oaktree Capital Management, a publicly traded asset management firm that applies its experience and expertise to private equity and debt investing. Oaktree Capital and Oaktree Special Situations Fund III target middle-market companies undergoing financial distress and/or operational challenges. Their industries of choice are healthcare, industrials, business and financial services, food and beverage, gaming, and consumer products.
In 2019, the Canadian serial acquirer, Brookfield Asset Management Limited (BAM) purchased Oaktree Capital Management and provided a portion of Oaktree Capital’s shares to be traded on the New York Stock Exchange (NYSE) under the ticker OAK.
What is the largest special situations fund? The Liontrust Special Situations Fund is the largest. It is an investor favorite because of its long history of quality company investments, superior long-term returns, and capital growth through strategic diversification and prudent risk management.
Read next: What are Special Situations Hedge Funds?
