U.S.-based asset manager Gemini Investment Strategies, which recently launched a convertible arbitrage and special situations fund, is considering employing over-the-counter derivatives to hedge the portfolio. Steve Winters, principal in Parsippany, N.J., said the trades are under evaluation as part of the firm's overall management of risk in the fund, dubbed the Gemini Master Fund, which launched this month with assets of over USD70 million. In addition to convertible arbitrage the fund takes positions in pairs of securities in either debt or equity that are viewed as having pricing anomalies. For example, Gemini may identify arbitrage opportunities between class A and B shares of common stock, he explained.
Equity puts and calls, credit default swaps and interest-rate derivatives will all be considered, Winter said.
Gemini expects to select counterparties for OTC trades based on criteria including price, he explained, adding that Goldman Sachs is the fund's prime broker.
