A perfect storm

Hedge fund investors have pulled billions of dollars out of convertible arbitrage strategies over the past year, but some managers now reckon the market has bottomed out. Is the strategy turning the corner? By Duncan Wood


Convertible arbitrage hedge funds have endured a painful reversal of fortune over the past 18 months. A rash of losing months, heavy outflows and high-profile fund closures prompted one article in the Wall Street Journal to refer to the death of a strategy previously seen by some as the most reliably profitable on the street.

"It's been tough," admits John Burke, the managing partner at Rumson Capital's Navesink Equity Derivative Fund, a New Jersey-based hedge fund that focuses on convertible

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