ClassReview: Convertible Backfire

Convertible arbitrage strategies fell 35.83 percent in the first 11 months of last year, twice the decline of the average hedge fund and barely better than the Standard & Poor’s 500 index’s 38.08 percent drop. Despite enormous challenges — the credit crisis, the inability to short certain equities, investor redemptions — convertible arbitrage managers who held their high-quality bonds through the September and October sell-offs looked good in November.