Why investors might consider a convertible arbitrage strategy as part of a diversified portfolio

Investing involves risk, including risk of loss.

Alternative Investment Risks: Alternative investments are investment products other than the traditional investments of stocks, bond, mutual funds, or ETFs. Alternative investment strategies may not be suitable for all investors and are not intended to be a complete investment program for any investor. Examples of alternative investments are limited partnerships, limited liability companies, hedge funds, private equity, private debt, commodities, real estate, and promissory notes. Some of the risks associated with alternative investments are: Alternative investments may be relatively illiquid. It may be difficult to determine the current market value of the asset. There may be limited historical risk and return data. A high degree of investment analysis may be required before buying. Costs of purchase and sale may be relatively high.

Arbitrage strategies attempt to take advantage of perceived price discrepancies of identical or similar financial instruments, on different markets or in different forms. Convertible arbitrage strategies generally involves gaining exposure to a portfolio of convertible securities and seeking to hedge the equity risk inherent in these securities by selling short the common stock into which the securities may be converted. If the requisite elements of an arbitrage strategy are not properly analyzed, or unexpected events or price movements intervene, losses can occur, which can be magnified to the extent a strategy or portfolio is employing leverage. Moreover, arbitrage strategies often depend upon identifying favorable "spreads", which can also be identified, reduced, or eliminated by other market participants. Arbitrage strategies may not play out as planned, resulting in potentially reduced returns or losses to the strategy as it unwinds failed trades. Convertible arbitrage may involve the risk of default in interest or principal payments, which could result in a loss of income, or a decline in the market value of the securities. The strategy also may involve the risk that underlying relationships between securities in which investment positions are taken may change in an adverse or unanticipated manner.

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