Falling down

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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