Overview
The Tycho Zazove Convertible Arbitrage Fund seeks to deliver cash +4–5% with bond-like volatility. To achieve this objective the sub-investment manager, Zazove Associates, employs a dynamic approach to Convertible Arbitrage with three core return drivers: Carry, Volatility Capture/Gamma Trading, and Tactical Opportunities, complemented by a structural tail hedge and dynamic credit overlay.
Strategy & Manager
Fund Strategy
The strategy is a market-neutral investment approach that seeks to exploit pricing inefficiencies between a company’s convertible securities and its underlying equity. There are three core sub strategies employed within the fund:
- Carry: Harvesting coupon income from long exposure to convertible bonds combined with short-rebates from equity hedge and option premium from systematic overwriting.
- Volatility Capture/Gamma Trading: Seeking to capture convexity from stock volatility.
- Tactical Opportunities: Participate in attractive primary-market issuance and refinancing combined with relative-value and flow-driven trading.
The strategy will also employ a structural tail hedge by leveraging cheap Convertible Arbitrage volatility and structural bond floor to help fund equity market put ladders.
Key Persons
Bret Lannert - Portfolio Manager
Bret joined the firm in 2021 as a Portfolio Manager supporting the firm’s core balanced convertible strategy as well as the convertible arbitrage strategy. Bret has over 17 years of experience executing complex investment strategies including interest rate derivative trading. Bret previously co-founded and served as the Managing Partner of a proprietary trading group specializing in quantitative volatility strategies. More recently, Bret worked as a product specialist developing advanced analytics for an enterprise software application for Asset Managers. Bret received a B.A.Sc. in Aviation Management from Southern Illinois University and his MBA from the University of Illinois.
Gene T. Pretti - Chief Executive Officer & Chief Investment Officer
Gene serves as Partner, Chief Executive Officer & Chief Investment Officer. Prior to joining Zazove Associates in 1989, Gene worked for First Boston Corporation where he specialized in institutional equity sales. He also has served as an analyst with CUNA Mutual Insurance Co. and Robert W. Baird & Co. He earned his MBA from the University of Wisconsin where he was selected for the Applied Program, an honors program emphasizing Security Analysis and Portfolio Management.
Performance
Class Performance
Commentary
Investment Manager’s Commentary – July 2026
The strategy returned -0.70% during July.
Market conditions shifted meaningfully during the month as became increasingly selective following an exceptionally strong first half for AI-related securities. While broader equity markets remained relatively resilient, the areas that had benefited most from investor enthusiasm during the first half experienced a meaningful repricing. Within convertibles, weakness was concentrated in AI-related and higher-delta securities, while primary issuance slowed significantly following June’s record volumes.
The portfolio’s performance was driven primarily by this repricing in convertible valuations associated with wider credit spreads. Carry remained a positive contributor during the month, partially offsetting the valuation decline. Listed option activity continued to provide an active opportunity set despite modestly negative attribution resulting from realized losses associated with the sale of several convertible positions.
Portfolio positioning remained largely unchanged throughout July. Leverage continued to be maintained at conservative levels, credit quality remained skewed toward higher-quality issuers, and trading activity outside of routine portfolio management remained relatively limited.
Although July’s repricing modestly improved the opportunity set, the portfolio did not believe valuations had adjusted sufficiently to warrant materially increasing risk. In our view, the market has begun to place greater emphasis on the fundamental characteristics of outright convertibles as long credit and long volatility instruments rather than viewing them primarily as vehicles for equity participation.
Looking ahead, we remain constructive on the long-term opportunity set for convertible arbitrage given the substantial financing needs associated with the ongoing AI capital expenditure cycle. However, while July represented a step toward more attractive valuations, we continue to believe expected returns remain below the threshold required to justify meaningfully higher leverage. The portfolio therefore remains selectively positioned while preserving flexibility to capitalize on more attractive opportunities should market conditions continue to evolve.
Documents
Contact
Registered Office of the ICAV:
35 Shelbourne Road
4th Floor
Ballsbridge, Dublin
D04 A4E0
Ireland
Dealing Contact:
Tycho ICAV
Attention: TA Department
c/o Société Générale Securities Services
SGSS (Ireland) Limited
3rd Floor, IFSC House
IFSC
Dublin 1, Ireland
T: 00353 1 6750 300
F: 00353 1 6750 351
E: [email protected]
Tycho Contact
Georg Reutter
Partner
T: +44(0)20 3384 8794
E: [email protected]
JJ Jardine-Paterson
Head of Investment Solutions
T: +44 (0)20 3598 6445
E: [email protected]
