FRANKFURT (Reuters) – Hedge funds focused on arbitrage between convertible bonds and the underlying stocks could outperform next year amid widening credit spreads and continued high volatility, Lyxor Asset Management said.
Another strategy Lyxor expects to do well in 2008 is “event-driven” where hedge funds pounce on stocks in companies involved in merger and acquisition (M&A) activity, Lyxor said on Wednesday.
Lyxor, part of French bank Societe Generale, has 72.8 billion euros (52.3 billion pounds) in assets under management of which 25.8 billion euros are in hedge funds.
“Higher volatility and lower correlation between asset classes will favour arbitrage hedge funds,” Mathias Ranke, head of Lyxor in Germany, told a news conference.
