Advent Capital debunks convertible arbitrage myths

Convertible arbitrage offers compelling returns and diversification benefits, yet investors have turned their backs on the strategy for all the wrong reasons, according to Advent Capital Management.

Convertible arbitrage may be among the most misunderstood of all hedge fund strategies.

Despite its stellar track record – convertible arbitrage funds have beaten the returns of the HFRI Composite Index on a one, three and five-year basis – it is often dismissed as a tactical strategy due to several myths that have arisen about the convertible bond market’s structure and liquidity.

Here we address these myths and highlight the main attributes of the strategy.

Convertible bonds are hybrid securities