Thu, Jun 21, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: Convertible bond arbitrage, 2009 and beyond

Monday, June 01, 2009

This article was written by Bryan Goh, First Avenue Partners LLP, London: Convertible arbitrage has been one of the best performing hedge fund strategies year to date in 2009, up 17.9% while the HFRI general index has gained 4%.

Recall, however, that convertible bond arbitrage was one of the worst performing strategies in 2008 losing 33% while the HFRI general index lost 19%. The losses came from a confluence of general risk aversion, deleveraging by banks and institutions, hedge fund redemptions and failures from over-levered portfolios, and a collapse in the funding mechanism. So acute was the risk aversion that convertibles were sold down regardless of issuer fundamentals or credit quality. Such sell-offs naturally create opportunities for the astute investor as idiosyncratic risk is mispriced by a market on the one hand, and systemic risk is overpriced by the market on the other, in the midst of market panic.

It is natural therefore that once the acute and broad based risk aversion had reached its zenith, convertible bonds would represent exceptional value and rebound. The last 4 months have seen this occur in a reversion of the systemic risk trade. Convertible bonds have rallied across the board with demand coming from fundamental credit investors, hedge funds, corporates and issuers buying back their own bonds. Notably absent or at best......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Paper: The performance of stocks actively pitched by hedge funds[more]

    Using a novel dataset drawn from investment conferences from 2008 to 2013, I show that hedge funds take advantage of the publicity of these conferences to strategically release their book information to drive market demand. Specifically, hedge funds sell pitched stocks after the conferences to ta

  2. North America - US fundraising for special purpose acquisition vehicles hits record this year[more]

    From AFR.com: Special purpose acquisition vehicles (spacs) are hitting the US market at the fastest rate on record, attracting the likes of Goldman Sachs and hedge fund investor Daniel Loeb for the two largest such deals in 2018. Spacs have raised $US4.5bn so far in 2018, the largest amount fo

  3. Investing - Man Group and AQR try to take aim at private equity industry, Hedge funds poised to be winners in AT&T-Time Warner deal[more]

    Man Group and AQR try to take aim at private equity industry From FT.com: The popularity of private equity investments has prompted asset managers such as Man Group and AQR to devise strategies that aim to replicate PE returns but at a much lower cost to investors. Both companies a

  4. News Briefs: David Stemerman's hedge fund holdings shrank before his run for governor, nvestment manager TSW triggers succession plan, Alan Howard joins Peter Thiel investing in Cologne-based fintech startup[more]

    David Stemerman's hedge fund holdings shrank before his run for governor But the U.S. holdings of Stemerman's Greenwich hedge fund, Conatus Capital, shrank from $2.6 billion at the apex to just over $1 billion before he announced his move into politics. (Hartford Courant) Inv

  5. British Empire: Pershing's 23% discount 'unsustainable'[more]

    From Citywire: The wide discount on Pershing Square Holdings (PSH) is 'unsustainable' and puts star hedge fund manager Bill Ackman under pressure, says British Empire (BTEM). Pershing is the third largest holding in the £850 million British Empire trust, managed by Joe Bauernfreund, which sp