Reuters – Hedge funds that specialize in convertible arbitrage made a comeback in the first two months of 2006 after poor performance and heavy liquidations in 2005, according to managers and newnumbers released on Tuesday.
Grateful to still be in business, several managers said, with a nod to author Mark Twain’s famous words, that reports of their sector’s death had clearly been greatly exaggerated.
Fresh industry data prove the point.
Research and ratings firm Standard & Poor’s on Tuesday said that hedge funds pursuing arbitrage strategies gained 2.63 percent in January and February. Last week Hedge Fund Research Inc. reported that convertible arbitrage funds gained 1.23 percent in February after rising 2.59 percent in January.
Last year was very different and funds lost 1.61 percent, having carried even larger losses during the early part of the year before curbing them some in the last months of 2005, HFR data show.
This year’s rebound has been linked mostly to the supply of cheaper securities and fewer funds competing in the space.
