Why should convertibles be considered as a superior option for a low volatility/defensive equity allocation?

An allocation to low volatility strategies has been a key component for helping to reduce the overall risk levels of a portfolio. They have reduced the overall risk metrics of a portfolio by helping to limit, in some cases, the downside risk during down markets. However, they suffer from a large disadvantage when compared to convertibles. Low volatility strategies have not demonstrated the ability to participate in the upside during periods of strong market rebounds and/or exceptional market conditions such as those seen since the start of the 2020 pandemic.

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