Do you know why hedge funds and prop desk like to dump their holding of convertibles to reduce leverage and raise capitals? Why can they dump other assets?
I’m guessing that it’s because when you own converts you need to offset your directional risk in the stock (hedge your deltas) with short stock…
I don’t think anybody likes dumping anything for just about any reason, but the convertibles can be the most liquid thing the hedge fund has to “dump”. It’s not like many people will pay 2/20 for an S&P 500 investment.
Thank you ahaha and JoeyDVivire. Liquidity might be a good point. Most hedge funds hold exotic assets. Relatively, convertibles might be the most liquid…