Asset classes

Convertible Bonds

Aviva Investors is unusual in providing global coverage and having an independent team that devotes its time purely to managing convertibles strategies.

• £2.5 billion of convertibles under management • One of the largest players in global convertibles markets • Investing in convertibles since 2000 • Long-only and absolute return approaches.

Hybrid convertibles tend to benefit more from rising equity markets than they suffer in falling markets.

The best of both worlds?

Convertibles bring together some of the best characteristics of bonds and equities. We consequently believe that there are good reasons to maintain long-term exposure to convertibles rather than dipping into the asset class at certain points in the market cycle. We are also of the opinion that the complexity of convertibles calls for specialist management.

Convertibles can provide an effective means of diversifying away from traditional equities and fixed income, and thereby improving your risk-adjusted returns.

This is particularly so in volatile markets, when convertibles tend to outperform equities but carry less risk than equities. Historically, “hybrid” convertible bonds have had an asymmetrical return profile, meaning that they benefit more from rising equity markets than they suffer from falling markets.

Aviva Investors Global Convertible Bonds - March 2013 – Justin Craib-Cox & Zahra Sachak

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Convertibles to benefit from improving fundamentals in 2013

Justin Craib-Cox, Fund Manager Convertible Fund Team: "Because convertibles are structured as bonds with an embedded option to convert into equity, they can offer investors up to two thirds of equity market upside but with less downside risk."

Data as at 30 September 2011.