Performance Overview
The Absolute Convertible Arbitrage Fund (ARBIX) delivered a net return of +1.68% in the fourth quarter of 2025, bringing the full-year 2025 return to +8.29%.
While credit spreads, interest rates, and equity index volatility all finished the quarter largely unchanged from where they began; the path was far from smooth. Underlying equities for many convertible issuers—particularly AI-related companies—experienced a sharp sell-off in early November as skepticism around the AI trade emerged abruptly.
During this period, the Bloomberg US Convertibles Composite Index experienced a -7.1% drawdown from October 29 through November 20. In contrast, ARBIX once again demonstrated the defensive characteristics of its hedged, non-directional approach, declining just 17 basis points over the same timeframe.
Q4 Fund Performance Breakdown:
The fund’s gross Profit & Loss (P&L) contributions for the quarter were driven by the following factors:
| Performance Driver | Contribution (Basis Points) |
| » Convertible bond appreciation relative to underlying stock: | +105 bps |
| » Yield/Carry (Interest and Dividend Income) | +83 bps |
| » Trading Activities | +11 bps |
| » Interest Rate Hedge | -1 bp |
As in prior quarters, the primary drivers of performance were the core convertible arbitrage relative-value trade combined with consistent yield and carry
Record New Issuance:
Convertible issuance remained exceptionally strong during the fourth quarter. Thirty-four new U.S. convertible deals were priced, raising approximately $29 billion in proceeds. For the full year, 2025 marked a record for U.S. convertible issuance, with $119 billion of new securities coming to market.
Market participants expect new issuance to remain elevated in 2026 and beyond. With credit spreads still near historic tights and pockets of stock-specific volatility remaining robust, issuers continue to achieve meaningful coupon savings by issuing convertibles versus straight debt. In addition, approximately $150 billion of convertible securities are set to mature over the next three years, increasing the likelihood of refinancing-driven issuance.
AI and the Convertible Market:
Convertible issuance in 2025 was driven in large part by the rapid expansion of AI-related businesses. According to Barclays Research, “AI-related companies are those whose core products depend on developing, selling, or embedding AI/ML models… where AI is a meaningful differentiator and/or revenue driver.”
Importantly, this exposure spans a wide range of industries, including data centers, networking, energy, materials, hardware, software, semiconductors, engineering, and infrastructure. This diversity is critical in constructing portfolios that can generate returns while managing risk. It also allows us to observe and learn as these business models mature and ultimately prove their economics.
Given the nascent nature of the AI trade, we continue to take a prudent and incremental approach to underwriting each issuer, focusing on risk-adjusted return potential rather than thematic enthusiasm. The capital-intensive, high-growth nature of these businesses suggests continued demand for convertible financing, which should remain supportive of the new-issue pipeline. An ancillary benefit of surging AI issuance and enthusiasm is a cheapening of the secondary market for traditional industries creating attractive buying opportunities for the Fund.
The U.S. Convertible Market Today:
The U.S. convertible market has grown to nearly $400 billion in size. Beyond its scale, the market offers a healthy balance of opportunity across trade types. Today, the market is approximately evenly distributed among equity-sensitive trades, balanced total-return trades, and credit-oriented trades.
This balance allows convertible arbitrage managers to construct portfolios with diversified exposure to credit, interest rates, and equity volatility—rather than being overly reliant on any single factor—while maintaining a disciplined, relative-value approach.
Fund Growth & Capacity:
Throughout 2025, ARBIX experienced steady inflows from both new and existing investors. The fund grew by over $300 million during the year and now stands at approximately $1.3 billion in assets under management.
Even at its current size, ARBIX retains significant capacity to execute the strategy effectively. The portfolio is unlevered and represents only about 0.3% of the U.S. convertible market, providing ample room to add positions while maintaining our selective approach to valuation, liquidity, and credit quality.
(Definitions, supporting data and risk disclosure below)
Quarter-End Performance for ARBIX: As of 12/31/25, the 1 year, 5 year and 10-year annualized performance for the Absolute Convertible Arbitrage Fund was 8.29%, 4.66% and 5.70% respectively.
Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, call the Fund at 888-99-ABSOLUTE. Returns include the reinvestment of dividends and capital gains. Some of the Fund’s fees were waived or expenses reimbursed; otherwise, returns would have been lower.
As stated in the prospectus, the Absolute Convertible Arbitrage Fund’s Total Annual Operating Expense ratio for Institutional Shares is 1.47% (gross and net) through July 31, 2026. Absolute Investment Advisers LLC, the Fund’s Adviser, has contractually agreed to waive its fee and/or reimburse Fund expenses to limit Total Annual Fund Operating Expenses to 1.20% through July 31, 2026 (the “Expense Cap”). This Expense Cap, which excludes all taxes, interest, portfolio transaction expenses, dividend and interest expenses on short sales, acquired fund fees and expenses, broker charges, proxy expenses and extraordinary expenses, may only be raised or eliminated with the consent of the Board of Trustees.
DEFINITIONS:
A Basis Point: (or bps) 1/100th of a percent.
The Bloomberg Global Convertibles Composite Index is a multi-currency benchmark, which aims to track performance of all major classes of convertible securities globally. It blends the US Convertible Index, the EMEA Convertible Index, and the APAC Convertible Index
Asset allocation decisions may not always be correct and may ad- versely affect Fund performance. The value of a convertible securi- ty is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on a convertible security’s investment value. Debt securities have interest rate, inflation and credit risks and are subject to prepayment and default risk. High yield and junk securi- ties involve greater risk and tend to be more sensitive to eco- nomic conditions and credit risk. Short sales may be considered speculative and it may be difficult to purchase securities to meet delivery obligations. The Fund may leverage transactions which include selling securities short as well as borrowing for other than temporary or emergency purposes. Leverage creates the risk of magnified capital losses. Diversification does not prevent loss or enhance returns. Foreign investments present additional risk due to currency fluctuations, economic and political factors,
These views are subject to change at any time based on market and other conditions, and Absolute Investment Advisers disclaims any responsibility to update such views. No forecasts can be guaranteed. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any Absolute Investment Advised investment product.
Investors should carefully consider the Fund’s investments objectives, risks, charges and expenses before investing. This and other information is in the prospectus, a copy of which may be obtained by calling (888) 992-2765 or visiting the Fund’s web site: www.absoluteadvisers.com. Please read the prospectus carefully before you invest.
Distributor: Ultimus Fund Distributors, LLC
Absolute Investment Advisers LLC is not affiliated with Ultimus Fund Distributors, LLC.
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This website is not a solicitation for the Absolute Funds outside of the United States. For more complete information about the Funds, including investment objectives, risks, fees and expenses, download a Prospectus and read it carefully before you invest. Additional Fund information can be found throughout this site. Mututal funds are distributed by Ultimus Fund Distributors, LLC. The ABEQ ETF is distributed by Northern Lights Distributors, LLC.
Before investing you should carefully consider each Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus and summary prospectus, a copy of which may be obtained by calling 888-99-ABSOLUTE or by visiting each Fund’s page on this website. Please read the prospectus carefully before investing.