While most hedge fund strategies had a tough time in May, convertible arbitrage -- normally one of the industry's steadiest performers - produced particularly poor returns. A selloff in credit markets sparked a resurgent interest in managers regarding credit risk, full valuations, rate risk and the impact on refinancings, and acquisition risks, according to a recent Goldman Sachs research report. The resulting trading activity drove most convertible bond indices down for the month. According to Goldman Sachs, the damage appeared most extreme in high yield credits.
As a result, various hedge fund convert arb indices posted losses of between