In January, stars proved that they can still align for convertible arbitrage players. After losing ground in 2005, the Absolute Return Convertible Arbitrage Index gained 2.17% for the month, its biggest monthly climb since November 2002. So what happened? For one, negative fund flows have taken out some competition, relieving pressure in what had been a very crowded strategy.
January's increased volatility and a slight creep up in interest rates may have also been a boost. Big winners for the month include Lydian Overseas Partners, which gained 3.95%; the DKR Soundshore Strategic Fund, which rose an estimated 3.71%;