Hedge Fund Investing: A Practical Approach to Understanding Investor Motivation, Manager Profits, and Fund Performance

Organizational Structure

The typical convertible arbitrage management company organization requires a unique set of fixed-income, credit, and listed equity and options trading, financing, and analysis skills.

Generally, a convertible arbitrage fund, like other hedge fund strategies, is owned and operated by a single general partner who is the founder and/or a small number of additional partners. The general partner and founder typically acts as the CEO and CIO of the firm and usually has either a very strong credit research or options trading background. Organization models vary slightly, depending on whether the fund is volatility, credit, or distress and special situations oriented.

Let's assume a fund is managing $1 billion in assets and participates in all aspects of convertible arbitrage. A profile of the fund's important roles and responsibilities and typical backgrounds follows:

One portfolio manager and CIO

One senior and one junior trader

Two senior and three junior credit analysts

One chief operating officer, one CFO/fund accountant, one compliance officer, and perhaps ...