Convertible issuance set a new record in 2020 with $113.7 billion of new issuance. The surge in issuance can be attributed primarily to growth sectors, such as Tech and Healthcare, and a significant number of issuers from recovery companies, primarily in the Consumer Discretionary sector, many of which were negatively impacted by the Covid-19 crisis. …
The convex nature and low duration characteristics of Convertibles provide an improved risk/reward profile to the underlying equities, with more enhanced downside protection than common equity positions, and less interest rate risk than most other fixed income investments. This allows for a different outcome as market volatility increases, if we should experience a significant downturn …
Benefits of Convertibles for Insurance Investors: Capital Efficiency– Convertibles are treated as bonds for Risk Based Capital charges. They hold up far better than equities during volatile markets. Diversification– Convertibles have low correlation to Bonds which is a benefit to Bond heavy investments. Interest Rate Sensitivity– Convertibles perform relatively well when interest rates rise. Asymmetry– Due to …
Convertible Bonds – An Investment Solution for Insurance Portfolios Read More »
Our outlook for convertible bonds for the second half of 2020 remains constructive. Convertibles provide exposure to fast growing, higher beta companies in the Technology and Healthcare space (currently over 50%+ of the universe), with meaningfully truncated downside and reduced risk. Convertibles provide risk-controlled exposure to some important secular trends and disruptive companies serving large …
