SEPARATELY MANAGED ACCOUNTS

Equity Market Exposure, Pursuing Principal Protection

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, barring default, and the relative safety of bonds. Convertible bonds may outperform equities over complete bull and bear market cycles and may do so with less volatility than a typical stock portfolio.

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.

Market Insights

PSN Top Guns List Q3 2022

Wellesley Asset Management announced it has been named to the celebrated PSN Top Guns List of best performing separate accounts, managed accounts, and managed ETF strategies for Q3 2022. The highly anticipated list…

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Commentary Q2 – 2022

Equity and fixed-income markets are off to one of their worst starts in history, as investors grapple with inflation running at 40-year highs, and seemingly accelerating monthly.

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Convertible Bonds and Volatility

Convertible bonds and volatility go hand in hand given the optionality embedded in a convertible security. At times convertibles act more like stocks and at other times more like bonds. This paper explores that concept and the thesis that higher volatility as expressed by the VIX(1) has historically been a positive for convertible bond performance relative to the S&P 500 Index and a 60% equity/40% fixed income mix(2).

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Commentary Q1

The first quarter of 2022 was painful for financial markets and heartbreaking for those watching the tragic events unfolding in Ukraine. The bond market massacre, beginning last year, accelerated with 10-year U.S. Treasury yields jumping to 2.32% from a low of 0.51% in early August 2020.

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High Yield – High Risk, Low Return

A high yield bond investor earns positive returns in three ways — clipping a coupon or current yield, an increase in value of the bond as holders enjoy the fruits of improved credit worthiness of an investment, or a fall in the general level of market interest rates.

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The Benefits of Synthetic Convertible Bonds

Convertible bond investors are often frustrated with limited investment choices or options regarding convertible securities especially related to sporadic or narrow convertible issuance, or that the universe of companies and sectors with outstanding convertibles is not larger or more diverse.

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Convertibles & Rising Interest Rates

The trend of lower rates accelerated beginning November 8, 2018 when 10-year U.S. Treasury bond yields began a descent that saw their yield drop from 3.23% to a recent jaw-dropping all-time low of 0.40% on March 9, 2020.

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Sweet Spot Investing with Convertibles

Convertible bonds are sometimes considered the “Swiss Army knife” of financial products because they can provide investors with principal protection (barring default), income, and equity-like returns.

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Bull, Bear and Upside Down Markets

An informative historical review of bull and bear markets leading up to the present state of our global economy. Bull and bear stock markets have been around since the beginning of stock indices in 1896. Currently, we are in the longest…

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