Bond investors look to convertibles to enhance portfolio returns

Traditionally regarded as a structured equity product, convertible bonds are increasingly finding their way into mainstream bond funds as a means to boost returns. Issuance of converts has surged in recent times as the outlook for equities has improved; reflecting their growing popularity

Investors are switching to converts

Convertible bonds are frequently described as offering the best of both the equity and fixed income worlds: the security of a bond floor on the downside with the benefit of an equity option on the upside. This should theoretically enable issuers of converts to attract a broad range of investors from both the equity and credit markets.

Until recently, the market was largely seen as the preserve of equity investors, particularly those from the hedge fund community. But this is beginning to change

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