Hedge fund - Convertible Arbitrage

CFA Level III Portfolio Management
#1

Can we say the arbitrage fund are market neutral?

I tried to google some arbitrage fund. For example, CQS Global Convertible Arbitrage Fund, and find it’s highly correlated to equity market…confused…

Thanks for help.

#2

This strategy involves higher credit risk due to high leverage exposure resulting from hedging via derivatives.

#3

These funds short equity and long convertible bonds. Unless the call option within the bond has a delta of 1 (the option is well in the money) and is an option to buy the exact amount of shares that the investor is short, the strategy will not be equity market neutral.