Reuters – A growing recognition that convertible bonds are cheap combined with the busiest month for merger activity since early 2000 to boost hedge fund performance in February, Standard &Poor’s said on Thursday.
S&P’s overall hedge fund index returned 0.8 percent in February, bringing the total for 2006 to 2.83 percent. That compares with 0.05 percent and 2.59 percent for the S&P index <.GSPC> of 500 stocks.
Arbitrage hedge funds buy and sell securities against each other and include convertible bond managers. S&P’s arbitrage hedge fund index returned 1.24 percent in February and 2.63 percent for the year to date.
A dearth of new issues and low volatility has over the past two years squeezed returns in the convertible bond sector to around zero.
