When can convertible arbitrage strategies enhance returns?
A. As we discussed earlier, convertible securities are hybrid securities that we believe provide an excellent opportunity for managing risk and reward over the long term. Accordingly, we believe that convertible arbitrage strategies have the potential to enhance performance throughout the market cycle. The benefits of convertible arbitrage may be particularly pronounced during periods of volatility in the equity marketplace. During volatile equity markets, the value of the conversion feature of a convertible bond typically increases in value, and arbitrage opportunities may be more abundant.
