Potential for strong returns across markets
Seeks to offer downside protection*, with the opportunity to participate in equity market upside
Dynamic approach
Exposure to what the team believes are the best opportunities available in the prevailing environment
Smart equity and bond diversifier
Potential to reduce equity volatility, while helping to diversify bond exposures
The strategy aims to generate long-term, absolute capital appreciation by investing with a fundamental bias, underpinned by the management team’s strong credit focus.
Inherent structural alpha
Seek to invest in convertibles exhibiting balanced characteristics, using bottom-up fundamental analysis to identify undervalued convertibles with positive asymmetry
Convexity with capital protection
Identify bonds with attractive risk-reward profiles, close to their implicit bond floor (investment value), helping provide investors with equity optionality with low downside risk
Seeking yield through fundamental analysis
Employ core credit analysis experience to identify undervalued, higher-yielding convertibles that will perform as the market recognises stable-to-improving company fundamentals
- Convertible bonds typically offer both the downside protection associated with debt and the additional opportunity to participate in equity market upside.
- Convertible bonds may offer shorter duration compared with straight bonds and lower volatility compared with underlying equities.
- We believe that the imperfect correlation of convertible bonds to underlying asset classes can enhance a portfolio’s risk-return characteristics.
- In our view, exposure to convertibles may be particularly valuable in environments characterized by upward cycling interest rates and volatile equity markets.
- Convertible bonds may benefit all types of investors, including equity, fixed income, and multi-asset investors.
With a strong emphasis on capital preservation* through an investment cycle, the strategy seeks to identify attractive risk-reward investments: convertible bonds trading at low premiums to their estimated pure bond values. In this way, the strategy seeks to capture upside potential and downside protection.
1. Sourcing
- Applying exclusion criteria to the global convertible markets universe, and removing restricted securities
- Using proprietary tool to screen the universe by position in real time
- Leveraging established network of brokers, bankers, and corporates
- Identifying attractive risk-return profiles on a daily and intraday basis
2. Fundamental and technical analysis
- Rigorous fundamental analysis, including meetings with management, deep credit assessment, and earnings modelling
- Analysis of quantitative and qualitative environmental, social, and governance (ESG) considerations
- Historical valuation and capital structure analysis
- Assessment of the governance practices of potential investments
3. Portfolio construction
- Bottom-up approach
- Prioritisation of issuers with robust or improving credit and ESG credentials
- Scenario analysis of portfolio exposures and risks
- Position sizing and assignment
- Ensuring credit and ESG quality asset allocation requirements
4. Portfolio monitoring
- Applying “best of” position policy
- Continuous assessment of investment thesis delivery
- Monitoring issuer progress against ESG targets/portfolio compliance
- Profit and loss optimisation
- Undertaking regular governance reviews with sustainability teams
* Capital still at risk.
For more information about our Credit capabilities
Risks
The Strategy’s core portfolio consists of convertible bonds with a high degree of diversification.
The Strategy invests opportunistically in debt instruments with a lower credit quality.
The value of an investment in the Strategy can go up and down. When you sell your shares, they may be worth less than you paid for them. If your currency as an investor is different from the reference currency of the Strategy, changes in currency exchange rates could reduce any investment gains or increase any investment losses.
The Strategy is subject to the following risks:
Securities that combine the elements of debt and equity and the risks associated with both, including greater volatility than for straight bond investments with an increased risk of capital loss.
The market for investments in emerging market countries may be less developed and it may be difficult for the Strategy to sell its investments in such markets. Investing in emerging markets can be riskier than investing in established markets due to increased volatility and lower trading volume.
Certain derivatives could increase the Strategy’s volatility or expose the Strategy to losses greater than the cost of the derivatives.
Certain securities could become hard to value, or to sell at a desired time and price.
IBOR risk is the risk that changes related to the use of the London interbank offered rate (LIBOR) or similar rates (such as EONIA) could have adverse impacts on financial instruments that reference these rates. The potential abandonment of these rates and transition to alternative rates could affect the value and liquidity of instruments that reference them and could affect investment strategy performance.
For full details of the Strategy’s risks, please refer to the prospectus available as mentioned in section “Practical Information.”
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