New Credit Suisse/Tremont Research Paper Examines the Recent Turnaround in the Convertible Arbitrage

New York, May 14, 2009 Credit Suisse/Tremont Hedge Fund Index has released a new research report, Convertible
Arbitrage: Shifting Gears, which examines the reasons behind the Convertible Arbitrage meltdown in 2008 and the
factors driving the strategy’s recent turnaround.
Convertible Arbitrage went from being one of the worst-performing strategies in the Credit Suisse/Tremont Hedge Fund Index
(“Broad Index”) in 2008, to one of the best-performing strategies in the first quarter of this year. Many believe that the
fundamental and technical reasons for convertibles’ devaluation in 2008 may correct as credit markets begin to stabilize and if
deleveraging continues to abate. Convertible Arbitrage: Shifting Gears discusses the strategy’s ability to generate positive returns
both during the declines in equity markets in January and February, as well as during the global market rallies in March and April.
Some key findings from the report include*:
􀂄 Convertible Arbitrage funds were caught in a “perfect storm” of fundamental and technical difficulties following the
fall of Lehman Brothers, resulting in a decline of 25.5% in the period from September 1 to December 31, 2008.
􀂄 In January, convertible bond yields were atypically more attractive than straight bond yields with similar maturity and
seniority in the capital structure.
􀂄 Although yields have dropped since their highs at the end of 2008, the resurgence of new issuances as well as
continued cheapening of the asset class points to Convertible Arbitrage as a strategy that may continue to rebound
in 2009 if conditions in the credit markets continue to improve.
􀂄 Volatility trading of the strategy was curtailed during the large declines in 4Q 2008 and early 2009, but may come
back later in the year if equity markets stabilize, albeit with a reduction in the use of leverage.
􀂄 Convertible Arbitrage registered one of the best performances in the Broad Index for 1Q 2009, returning 7.7%.
* Past performance does not guarantee or indicate future results.
Credit Suisse Tremont Index LLC industry commentaries and publications are available on the Research section of our website,
www.hedgeindex.com. Click here to view a full copy of the report.
Information
Credit Suisse Hedge Fund Index Investor Relations, hfindices.ir@credit-suisse.com
Meg Bode, Bode Associates, telephone 516 869 6610, meg@bodeassociates.com