Convertible bonds offer the upside potential of equities combined with the benefits of bonds. The market is enjoying rapid growth, and attractive investment prospects abound.
Convertible bonds are a unique asset class – they offer investors the potential for equity-like appreciation while providing downside protection similar to that of a fixed income instrument. Given their asymmetric risk/return profile, convertible bonds tend to perform well in many market scenarios and are a compelling long-term contributor to returns in a multi-asset-class portfolio.
In February 2021, the global convertible bond market reached a record-high volume of over USD 490 billion, offering an attractive range of very diverse investment opportunities.
When actively managed, convertible bonds can better position you to reach your investment objectives. Read on to learn about the investment strategies available for convertible bonds.
Watch senior portfolio manager Rossitza Haritova give a brief introduction to convertible bonds as part of our fixed income video learning series.
We are a specialized boutique with a leading position in global convertible bonds and other asymmetric and convex investment strategies1. Investors have been benefiting from our outstanding track record in actively managing global convertibles since 1984. With a range of defensive, balanced, and dynamic global convertible bond strategies on offer, there is a portfolio to suit investors’ diverse needs.
1 Convex investment strategies make use of the fact that the value of a convertible bond is more sensitive to a rise in the share price than it is to an equivalent drop (asymmetry).
This fund focuses on companies worldwide with high credit quality (at least 75% are rated “investment grade2”). The superior liquidity of investment-grade bonds gives the management team additional flexibility.
2 Investment-grade bonds have a minimum rating of BBB (S&P) or Baa (Moody‘s), which means that their issuers are considered able to meet their obligations.
This globally diversified portfolio provides exposure to the highly asymmetric segment of the entire convertible bond universe, with a particular focus on special situations3. The fund invests in convertible bonds with very asymmetric risk/reward profiles, including those issued by young and fast-growing companies.
3 Special situation is an atypical event, which has the potential to alter the future course of a business, materially impacting the company's value. It is not related to the company’s fundamentals.
This fund pursues a dynamic strategy. It provides exposure to the broadest convertible bond universe with no delta4 or credit constraints, resulting in the most aggressive risk/return profile within the asset class.
4 Delta is a measurement of the percentage rate of change in a bond’s price with respect to the price change in the underlying stock.
This fund is an exclusive solution for Swiss pension funds meeting the BVV 25 criteria under the OAKBV6 regime. The globally diversified fund invests in investment-grade convertible bonds. Its sharp focus on issuers with high credit quality reduces price volatility and provides additional support during market downturns.
5 VV 2 - Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans. It governs the minimum requirements for occupational provisions with a pension fund.
6 OAKBV - Occupational Pension Supervisory Commission.
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