Convertible bonds may be a suitable investment for absolute return oriented, long-term investors. Wellesley Asset Management offers separate account management for registered investment advisors, sponsored managed account platforms and other institutional investors. Convertibles can offer equity market exposure while seeking principal protection and the relative safety of bonds. Convertible bonds may outperform equities over complete bull and bear market cycles and do so with less volatility than a typical stock portfolio.
Convertible bonds may be an option for investors looking to diversify their portfolio. For the period, January 1, 2008 through September 30, 2017 Wellesley’s (WC) 1 Convertibles Composite had a correlation of 0.10 with the Bloomberg Barclays Capital U.S. Aggregate Bond Index and 0.82 with the S&P 500 Total Return Index.
A Blend of Debt and Equity
Convertible bonds can blend the characteristics of both bond and stock investments. Convertibles can offer equity like returns due to the equity conversion component with generally less volatility.
Use with Multiple Asset Classes
Convertibles may provide attractive returns that can compare to common stocks and bonds. Historically, in periods of rising interest rates, most fixed income instruments have lost value while convertible bonds have oftentimes increased in value on a total return basis during these periods. In addition, adding convertibles to a stock and bond portfolio may improve the overall risk/return profile.