Water Island Capital is a merger-arbitrage fund that was founded in 2000 by John Orrico. In its latest 13F filing, the firm revealed an equity portfolio valued at nearly $3.0 billion, which contains 106 stocks. The majority of the companies from the portfolio are in line with the fund’s strategy and represent companies that have been recently acquired. However, in this article we will focus on three-largest stakes in terms of value, which are represented by non-arbitrage companies: B/E Aerospace Inc (NASDAQ:BEAV), Yum! Brands, Inc. (NYSE:YUM), and T-Mobile US Inc (NYSE:TMUS).
Since its foundation, Water Island managed to successfully gather around $3.5 billion in assets and it currently employs around 40 people, with a significant level of expertise. Among tits portfolio managers are Gregg Loprete, a former employee of Ramius Capital (the former parent company of Jeff Smith‘s Starboard Value) and Ted Chen of Jefferies Group. Currently, Water Island manages three funds: flagship Arbitrage Fund, which has a value of around $2.9 billion, Arbitrage Credit Opportunities Fund, and Arbistrage Event-Driven Fund, which have some $9.0 million and $90 million respectively.
As it was mentioned above, the majority of equity positions in Water Island’s 13F portfolio are represented by companies that have either been acquired or are in the process of a merger. The largest portion of the portfolio is allocated towards the healthcare sector, which amasses over 30% of the total value, followed by finance, consumer discretionary, and technology stocks. One of the stocks on which Water Island has been bullish on during the last three months of 2014 is B/E Aerospace Inc (NASDAQ:BEAV). The fund revealed ownership of around391,800 shares, up by 93% on the quarter. The stake is valued at $22.73 million. In December, B/E Aerospace Inc (NASDAQ:BEAV)completed the spin-off of its aerospace consumables business KLX Inc (NASDAQ:KLXI). In its latest 13F, Mr. Orrico’s fund reported ownership of 8.31 million shares of KLX. Another shareholder of B/E Aerospace Inc (NASDAQ:BEAV) is Mario Gabelli‘s GAMCO Investors, which owns some 626,900 shares as of the end of 2014.