Favouring convertibles

US and European convertible bonds (CBs) are the most popular among institutional investors, new research from NN Investment Partners reveals.

Around a third (28 percent) of respondents said US convertibles were favoured the most by investors, while 27 percent said this of European ones. UK and Japanese convertibles were each cited by 13 percent of respondents, Asia ex-Japan by 10 percent and Emerging Markets by 7 percent.

Tarek Saber, lead portfolio manager, NN (L) Global Convertible Opportunities fund: “Our findings are a reflection of the favourability of US and European companies among investors and the low confidence they have in emerging markets. Essentially, our investment process is to analyse companies first and then use convertible bonds as the vehicles to invest in them.”

“Convertibles do have a strong correlation with equities – around 90 percent – but with around half the volatility. By placing between 3 percent and 10 percent exposure in their portfolios to CBs, investors can enhance their risk-adjusted returns.”