Strategy E · Opportunistic · 5–10%

Special Situations

Preferential allotments, rights issues, warrants, corporate actions and temporary dislocations from non-economic or forced selling — each position evaluated independently on risk-reward asymmetry and exit clarity. The smallest sleeve, taken only when the asymmetry is unmistakable.

Role in portfolio: Opportunistic sleeveCatalysts largely uncorrelated with the rest of the book — diversification by event, not sector
Target allocation: 5–10% of the portfolio
Opportunity: Structural sellers and structural discountsRights and preferential issues price at discounts by design; forced selling prices at discounts by circumstance
What creates alpha: Buying from sellers who must sellWhen the counterparty’s motive is non-economic — regulation, redemption, distress — price and value separate mechanically
Investment criteria: Asymmetry first: bounded downside, identifiable normalisation pathEach situation stands alone — there is no thematic book here
Typical holding period: Event-defined — weeks to quartersThe position ends when the dislocation closes, not when a calendar says so
Liquidity: Varies by instrument; sized accordinglyWarrants and preferential allotments may carry lock-ins priced into the entry
Primary risk: The dislocation being information, not noiseWhat looks like forced selling is sometimes an informed exit — stage 3 and 4 diligence guards the difference
Exit framework: Exit into normalisationPre-defined value or time bounds; asymmetry gone means position gone
Research process: Full pipeline at event speedThe 48-hour IC window matters most in this sleeve
Catalysts: Corporate actions · rights/preferential pricing · index-flow distortions · distress resolution

The Transitions Thesis All Five Strategies