Are convertible bonds an all-weather asset?

08-15-2017
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Authors

Martin Kuehle
Investment Director Convertible Bonds
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Michael Sommer
Product Executive
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Does equity protection mean fixed income risk?

Investing in convertible bonds is all about downside protection; combining equity-like returns with in-built, protective stabilisers. A well-defined and well-run convertibles strategy can offer both an automated protective element and high upside equity participation.

Indeed, defending capital against equity market setbacks is the usual angle from which investors approach the asset class. Yet given the market backdrop, it seems important to ask how good the asset class is at protecting against fixed income risk. The two traditional risks metrics in fixed income are credit risk and duration, with both highly relevant in today’s unusual market backdrop.

What are the dangers of higher interest rates and a potential widening of credit spreads to convertible bonds?

Read full reportAre-convertable-bonds-an-all-weather-asset
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The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.

Authors

Martin Kuehle
Investment Director Convertible Bonds
See all articles
Michael Sommer
Product Executive
See all articles

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