Does Two Months A Comeback Make?

Last week brought news that convertible arbitrage is making a comeback as the first two months of 2006 have seen the strategy as the top performer on many an index.

Last week brought news that convertible arbitrage is making a comeback as the first two months of 2006 have seen the strategy as the top performer on many an index. That seems enough proof for Advent Capital Management to get back into it. According to Financial News, the New York hedge fund specializing in convertible arb is opening an office in London, to better keep its ear to the ground for Euro opportunities in the strategy. One can’t really blame Advent for getting excited, though. London-based fund manager Ferox Capital Management has seen its convertible arb climb 9.55% in the first two months, and giant GLG Partners’ peer fund was up a healthy 7.05% in January alone. FN says last year’s convertible arb doldrums sent many a bank specialist a-packing, and investors pulled 8% of funds in convertible arb. Citing investors, FN says some 50 hedge funds have left convertible arb because of poor performance, meaning that if the strategy performs as some predict, funds, banks and investors a like will be caught with their assets down. Then, Advent’s move may look really smart. On the other hand, last year was predicted to be a good year for convertible arbitrage, too.