WEST PALM BEACH, FL (www.hedgeco.net) – The global hedge fund industry attracted more than $24.6 billion during the first quarter of 2005, according to new data. However the convertible arbitragestrategy was the biggest loser for the quarter. That strategy saw redemption of more than $2.8 billion, according to data from the Tremont/ CSFB hedge fund index. The Convertible Arbitrage Strategywas the biggest loser for the period, part of the losses resulted from the troubles of the auto maker industry. A few weeks ago, credit analysts downgraded the bond rating status of Ford Motors andGeneral Motors.
Bob Schulman, chief executive of Tremont Capital Management, said, “Convertible arbitrage funds have been under pressure since the end of the fourth quarter – performance lagged and then everyone rushed to sell and redistribute as well as selling to reduce leverage.�
Part of the trouble stems from the fact that hedge fund companies own a large percentage of the convertible securities. Analysts believe that between 50-80 percent of all the convertible arbitrage securities were purchased by the hedge fund managers. So when the managers foresee problems for the asset class, there is a mad rush for the exists.
However the hedge fund industry continues to attract new money, new celebrity hedge fund managers continue to attract investor assets. For instance, Eton Park Hedge fund, launched late last year by former Goldman Sachs Manager, Mindich reportedly attracted over $3.5 billion in new money. The biggest winners attracting more assets during the last quarter were multi-strategy funds and event-driven strategies. Both strategies saw an asset inflow of $6.5 billion and $8.2 billion respectively.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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