Convertible Bonds experienced an incredible 2020 and start to 2021. The Bloomberg Convertible Index outperformed both the S&P 500 and Nasdaq indices in 2020. We can’t mention CB’s without highlighting Tesla which attributed approximately half of the 2020 convertible bond index return in 2020. The Bloomberg Convertible Index is off to a hot start in 2021, up over 10% through 2/16/21.
Source: Bloomberg, as of 2.17.21
Adding convertibles to allocations during times of market turmoil can position investors to clip income and potentially capture equity market upside as the market recovers, while also incorporating minimized downside. But with convertibles specifically…context, valuation and timing are everything.
Right now, given the backdrop of the convertible sector from a pricing perspective, we believe investors utilizing convertibles exposures in their portfolios, specifically in lieu of traditional fixed income, could be injecting significant risk into their clients’ portfolio.
Read here for a breakdown of the risks and (lack of) rewards in today’s convertible market.
Disclosures
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The information contained herein should not be considered a recommendation to purchase or sell any particular security. Forward looking statements cannot be guaranteed.
This commentary offers generalized research, not personalized investment advice. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this commentary should be interpreted to state or imply that past results are an indication of future investment returns. All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with an investment & tax professional before implementing any investment strategy. Investing involves risk. Principal loss is possible.
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