Australian investors can gain exposure to a global portfolio of convertible bonds with the launch of the Lazard Global Convertibles Fund, a registered managed investment scheme, offering Australian investors access to a US$500 billion, and growing, asset class.
Offered by Lazard Asset Management Pacific Co, the fund offers exposure to a global portfolio of convertible bonds, with a maximum 10% equity position reflecting bond conversions.
The fund typically holds between 60 and 80 securities, selected from a universe of 900 – 1000 convertible bonds, while seeking to achieve total returns in excess of the Thomson Reuters Global Focus Hedged (AUD) Convertible Bond Index (net interest reinvested) over rolling five-year periods.
Managed by managing director and portfolio manager/analyst at Lazard Asset Management, Arnaud Brillois, and an investment team based in New York and Paris, the Lazard Global Convertibles Fund employs a fundamental, bottom-up approach that utilises rigorous qualitative and quantitative analysis to drive security selection, complemented by a top-down process that guides tactical positioning.
“Investors have been faced with minimal fixed income returns, late-stage equity valuations, and the prospect of growing market volatility this year,” Arnaud Brillois said. “At the same time, convertible bond issuances have reached their highest levels since 2007, reaching US$101.8 billion for the year to date*.
“The dual nature of convertible bonds gives them an advantage over conventional investments, as they tend to exhibit bond-like characteristics in declining equity markets, and equity-like characteristics in rising equity markets.”
A traditionally lesser-known asset class, convertible bonds are corporate bonds issued with a call option that gives the holder the right to convert the bond to equity shares, bringing together equity and fixed income properties in a unique combination.
“Convertible bonds have started to earn dedicated allocations in institutional portfolios and, as such, we believe these securities are beginning to be viewed as a distinct asset class,” Brillois said.
“We expect inflows into the asset class to continue as convertible bonds become especially relevant in volatile markets, and we are pleased to offer a solution for Australian investors seeking access to this asset class.”
* As of 31 July 2020