Financial Times FT.com

Lehman Brothers

Arbitrage disruption hits hedge funds

By James Mackintosh in London

Published: September 23 2008 23:30 | Last updated: September 23 2008 23:30

Arbitrage strategies at the heart of the hedge fund industry were decimated last week, as a combination of fire sales of assets from investment banks and worldwide restrictions on short selling hit their profits.

Convertible bond arbitrageurs had the worst performance of any hedge funds, according to investors, as large portfolios of bonds were dumped into the market – probably, said several managers, as Lehman Brothers’ proprietary trading desks closed.

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