Are you ready for volatility spikes?
We believe convertible bonds provide a way to maintain positive equity exposure while preparing for higher volatility regimes.
- On average, convertible bonds have enjoyed 75-85% of equity market returns over a 10-year time horizon
- Their risk profile is in-line with traditional bond investments, even during periods of market crisis.
- During 2018, they outperformed equities, experiencing a shorter and shallower drawdown.
- In 2019 to-date, convertibles have delivered positive performance in-line with other asset classes.
As political risks increase around the globe, we believe the greatest threat of all has become the trade war uncertainty between the US and its trade partners, primarily China.
Historically, periods of significant political uncertainty have caused financial markets to become more volatile. Over the past few years, the actions of central banks seem to have capped volatility, despite the political uncertainty.
However, our view is that as the US economic and investment cycle matures, episodes of higher volatility will become more frequent.
We believe convertible bonds provide a way for investors to maintain positive exposure to equity markets while preparing their portfolios to weather higher-volatility regimes.