Six myths about convertible bonds and one real comeback

As the stock market euphoria fizzles and global trade rhetoric takes centre stage, convertible bonds are quietly making their comeback as a top-performing, resilient asset class, argues Ivan Nikolov, Head of Convertible Bonds.

In our new report, we go about debunking some of the most common myths about the CB asset class, while also presenting the current investment case:

• Valuation: Issuers of convertible bonds have a significantly higher expected earnings growth rate and at the same time more favourable valuations (over 20% PEG discount) compared to the broad equity market.
• Refreshed opportunity set: More new issues from exciting companies, less regulation and more support for growth and M&A in the medium term.
• Asymmetric structure: A combination of equity price gains and and fixed income, resulting in returns similar to equities but with lower volatility. This is particularly advantageous in high-growth/high-volatility themes such as AI and healthcare.
• Selective approach to investment: Success also depends on security selection, as active management offers opportunities for additional returns compared to mechanically constructed indices.

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