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Battered convertibles lure brave hedge funds

guardian.co.uk – Bolder hedge funds are looking to snap up convertible bonds at bargain prices, returning to an asset class that became a no-go area for them only a short while ago.

The convertible bond market has tumbled 44.5 percent since September, as hedge funds facing a wave of client redemptions paid back bank debt. Many said convertible arbitrage strategies were a thing of the past.
But yields are now reaching all-time highs and are starting to attract the first daring hedge funds back to the investment arena they traditionally dominated.
"You can buy a convertible right now on a 25 percent discount to the same bond issued by the same company," Emmanuel Roman of GLG Partners, one of Europe’s biggest hedge funds, told a recent conference.
"You get a 25 percent discount plus a call option. That doesn’t make any sense," he said.

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