AQR Hails Comeback of Convertible Arbitrage in Era of High Rates

AQR Capital Management says the resurgence of a niche strategy riding debt that can convert into equity has room to run, as a trade that was famously routed during the financial crisis enjoys a big comeback.

The $109 billion quant firm co-founded by Cliff Asnessreckons the latest revival of convertible arbitrage, which seeks to capitalize on price discrepancies between convertible bonds and their underlying stock, will gather pace amid a wave of new issuance in the higher-for-longer interest rate regime. The trade has overtaken merger arbitrage as the largest strategy exposure in the $1.9 billion AQR Diversified Arbitrage ...