The continuing success of convertible-arbitrage funds
continues to confound skeptics
It's no secret that convertible-arbitrage funds have become
something of a darling to hedge fund investors. Throughout the
last two years they have poured a record amount of capital into
this strategy, which is known for its steady returns in all
forms of market conditions.
But with convertible funds flush with cash at a time when
global issuance has dropped dramatically, some investors - not
to mention a few managers - are wondering how much longer the
party can continue.
While managers have continued to reap strong rewards in an
environment of low interest rates and high volatility, there
are fears for what might happen if rates start to rise and
volatility subsides. Some fear that a perfect storm may be
brewing which will lead to a spectacular bust.
Indeed, early last year some investors pulled money from
convertible managers on the basis...