Convertible arbitrage hedge funds, one of the best-performing hedge fund strategies last year, have produced negative returns for the year to July, according to MSCI, the index provider.

MSCI found 59 convertible arbitrage hedge funds returned -0.2% for the first half of 2004 compared to 6.4% for the same period last year and 9.8% for the whole of 2003. The strategy is currently performing worse than most other hedge fund strategies, said MSCI which tracks 81 such funds.