Germany’s Universal-Investment and US-based York Asset Management have jointly launched a new absolute return fund which they say is Europe’s first UCITS-compliant global merger arbitrage strategy.

The York Lion Merger Arbitrage Liquidity Fund UI is based on the Lion Fund Limited, a vehicle which was launched by York in 1996 with the aim of generating long-term capital appreciation of nine per cent per annum with a low correlation to equity markets.

Fund management firms have launched a raft of UCITS-based products as they are meant to offer high levels of liquidity and transparency; a number of firms have rolled out absolute return products which bear some of the characteristics of hedge funds. This has prompted some industry figures to warn that the underlying liquidity of certain UCITS funds may not be high enough to match their supposed daily liquidity promises.

The new product invests globally in liquid securities listed in both established and emerging markets, focusing on arbitrage opportunities occurring due to mergers and takeovers as well as other “event driven” situations.

“With our investment method we distinguish between seven different types of event driven situations. These types range from special purpose acquisition company discount trades to friendly or hostile takeovers, and to investments in liquidating securities,” said Nick Walker, chief investment officer at York Asset Management and manager of the fund.

Universal-Investment has some €121 billion (around $155 billion) in fund assets under administration, while York Asset Management has $290 million in assets under management.