Depending on the delta, each manager generally chooses to focus on a one or more specific type(s) of convertible bonds (varying in rating and credibility). Convertible Arbitrage funds attempt to exploit the mispricing within various convertible securities. Since this amount is often very small, many of these funds employ leverage to maximize return. Convertible Arbitrage managers are exposed to the volatility and/or credit risk of the bond, while they generally hedge the default risk by shorting shares in the company’s stock. This strategy is typically market neutral.