Falling down

The convertible arbitrage sector has performed well over the past few years, but with interest rates bottoming out and equities being squeezed many believe the sector could be heading for trouble

Despite steady performances in past years, many fund of fund managers believe convertible arbitrage is heading into a stiff tail wind.

'Every four years the convertible arbitrage sector blows up, it is like the Olympic Games,' says David Smith, who at Global Asset Management runs $6.5bn in hedge strategies. 'We saw that in 1994, 1998 ' and what year is it this year?'

But the bad news is yet to be revealed by the statistics. The current batch from Standard & Poor's shows a good return from 1/2

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