WEST PALM BEACH, FL (www.hedgeco.net) – Convertible bond arbitrage hedge fund strategy is facing its worst start ever for the first five months; the strategy has lost 6.73 percent during the firstfive months of 2005. According to published reports, GLG Partners LP’s Market Neutral Fund was down 17.2 percent as of May 31. Marin Capital LP, a $1.4 billion fund convertible arbitrage fund in SanRaphael, California, told investors last week that it would be liquidated because of a �lack of suitable investment opportunities.”
According to Hedge Fund Research Inc, a Chicago based hedge fund research firm, this is the worst start for convertible arbitrage managers since it started keeping records for hedge fund performance in 1990. The strategy has about $45 billion in investor assets. The losses in the convertible arbitrage portfolios have negatively impacted the investor confidence, following the downgrading of the General Motors and Ford Motors bond ratings last month.
Mark Yusko of Chapel Hill, North Carolina-based Morgan Creek Capital Management LLC believes the declines represent a buying opportunity. He said, �We’ll have one more quarter of pain and then the next 15 months will be good.” A total of about $1.8 billion was redeemed from convertible bond funds in the first quarter, according to Tremont Capital Management Inc. of New York.
Richard Yakomin a partner at Gemini Investment Strategies LLC in Parsippany, New Jersey, a $97 million fund that specializes in convertible bonds said, �We made a decision in mid-April to increase our exposure.” Yakomin added, �Attracting capital to the strategy this year has been nearly impossible, but we’re sensing more interest.” Michael Revy, head of research at Los Angeles-based Froley, Revy Investment Co., a convertible-bond manager with $4.1 billion in assets, said you�re getting a lot more spread for volatility than you did a year ago.�
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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