|
Strategy
Sub-strategy
|
Brief description
|
Example
|
Risk
(Note
1)
|
Key risks
|
Market protection
|
Liquidity
|
Term
(Note
2)
|
Returns
(Note
3)
|
|
|
Event driven
- Event based
mis-pricing
|
|
Agreed mergers
|
Buy target stock at discount
to merger price
|
CBA/CGH
|
Low
|
Deal collapse
|
Cash offer or short stock offer
|
High
|
3
|
15%
|
|
Hostile
takeovers
|
Likely increase in offer
|
SID
|
Medium
|
Deal collapse, no increase
|
Cash offer or short stock offer
|
High
|
3
|
35%
|
|
Floats
|
Likely ‘stag’ premium
|
IBA
|
Medium
|
Listing discount
|
Short holding, market-out
|
Very high
|
1
|
35%
|
|
Capital
raisings
|
Discounted
issue price
|
AUN
|
Low
|
Price collapse
|
Short holding, short stock
|
Medium
|
1
|
20%
|
|
Buy-backs
|
Sell
at premium to market price
|
WOW
|
Low
|
Short recall, price spike
|
Short holding, cash offer
|
Medium
|
1
|
20%
|
|
Distressed
- Irrational selling
|
|
Distressed equity
|
Buy at
mispriced value
|
BPC
|
High
|
Bankruptcy
|
Low market correlation
|
High
|
24
|
30%
|
|
Distressed
debt
|
Buy at discount to face value
|
Daweoo
|
High
|
Insufficient wind-up proceeds
|
Low market correlation
|
Low
|
24
|
30%
|
|
Stock
selection - Growth,
quant. or value based selection
|
|
Industry versus industry
|
long
industry vs short industry
|
Telco/gold
|
Medium
|
Selection and timing
|
Equal value longs/shorts
|
High
|
12
|
15%
|
|
Intra
industry
|
Relative growth or value
|
CWO/TLS
|
Medium
|
Selection and timing
|
Equal value longs/shorts
|
High
|
12
|
15%
|
|
Good
stocks, bad stocks
|
Relative
growth or value
|
PBL/CSR
|
Medium
|
Selection and timing
|
Equal value longs/shorts
|
High
|
12
|
15%
|
|
Relative value
- Mean reversion and value trading
|
|
Stub trades
|
Holding
company versus subsidiary
|
NCP/FOX
|
Low
|
Unexpected price divergence
|
Equal value of longs/shorts
|
High
|
6
|
20%
|
|
Pairs
trades
|
Similar securities
|
RIO/RTZ
|
Low
|
Unexpected price divergence
|
Equal value of longs/shorts
|
High
|
6
|
15%
|
|
Closed-end
funds
|
Change in discount to assets
|
FXF/FXJ
|
Medium
|
Unexpected price divergence
|
Equal value of longs/shorts
|
Medium
|
6
|
20%
|
|
Investment banking
- Active involvement in
investment
|
|
Pre-IPO placement
|
Late stage development capital
|
Looksmart
|
Medium
|
Listing delayed
|
Unlisted
|
Very low
|
12
|
20%
|
|
Unlisted
convertibles
|
Unlisted high yield equity
|
HIH
|
Medium
|
Credit risk
|
Unlisted
|
Very low
|
36
|
20%
|
|
Greenmail
|
Prevent compulsory acquisition
|
Coldstream
|
Medium
|
Minority oppression
|
Unlisted
|
Very low
|
36
|
30%
|
|
Wind-ups,
auctions etc
|
Force takeover,
reorg. etc
|
Rural Property
|
Medium
|
Ability to force value event
|
Low market correlation
|
Low
|
6
|
30%
|
|
Arbitrage
- Mispricing of fungible securities
|
|
Warrants
|
warrants
vs. physical
|
WBCWNA/WBC
|
Low
|
Special dividend
|
Equal value of longs/shorts
|
Medium
|
12
|
15%
|
|
Convertibles
|
convertibles
vs. ordinaries
|
Acer CBs/
Acer
|
Low
|
Hard call, takeover
|
Equal value of longs/shorts
|
Medium
|
36
|
15%
|
|
Instalments
|
fully
vs partly paid securities
|
GANCA/
GAN
|
Low
|
Stock loan recall
|
Equal value of longs/shorts
|
Medium
|
12
|
15%
|
|
Index
|
index
futures vs physical stocks
|
SPI/
Index fund
|
Low
|
Tracking risk
|
Equal value of longs/shorts
|
Medium
|
6
|
15%
|
|
Note 1:
Risk is based on absolute strategy risk
and assumes no use of gearing
Note 2:
Term is likely maximum expected holding
period in months
Note 3:
Return is expected annualised return
assuming no use of gearing and before fees
Coastal Capital
Limited
|
