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Hedge Fund Ownership

The Thriller Zs

November 4, 2021

The two big convertible arbitrage plays in the first part of this year were real estate platform Zillow and social game publisher Zynga. The strategy involves buying the bonds while short-selling the stocks, so it's worth following up to see if the arbitrageurs' bearish positions were warranted.

In a word, yes. As we await the next round of 13-F filings we see that, at the end of May, 72% of Tenor Capital Management's exposure was to Zynga while a similar proportion of of SSI Investment Management's was to Zillow. Castle Creek Arbitrage, which added the most alpha of an convertible arbitrage shop, followed Tenor's lead, placing 29% of its eggs in the Zynga's FarmVille.

Still, Liden Advisors went to 80% exposure on Zynga but didn't experience the alpha pop that its competitors realized. Meantime, Basso Capital Management showed some solid performance without excessive exposure to any single name.