Convertible bonds allow investors to participate in the upside of the equity market with less volatility. Global focus, sustainability or capital preservation: Union Investment offers investors a wide range of convertible bond solutions.
Convertible bonds are an attractive investment compared to other asset classes because of their convex payout profile. Convexity means that convertibles tend to benefit more from equity price rises than they have to give up when equity prices fall. However, their high complexity and market structure require professional management and a broadly diversified investment.
Good reasons for a convertible bond investment with Union Investment
Large and experienced team of specialists
- We have been managing convertible bonds since 1995 and our team of seven specialists has an average of 19 years of professional experience
- We take a global investment approach with regional specialists for in-depth market penetration. We manage institutional funds and customized product solutions
Dedicated investment process for convertible bonds
- We successfully and systematically combine top-down and bottom-up approaches. The aim is to maximise the realised asymmetry relative to the share price as a key factor.
- We develop innovative approaches, such as the targeted use of proprietary synthetic convertible bonds*. Efficient in-house replication can deliver trading and portfolio management benefits
Active risk management and sophisticated risk control
- We maintain a culture of active risk management, supported by a robust IT infrastructure.
- Our analytical tools are closely integrated with the investment process and portfolio management. Risk control, portfolio management and reporting are based on a single set of data.
We have also been applying Union Investment's sustainability expertise to convertible bonds for over 10 years. We have the additional support of our in-house SIRIS software and our team of sustainability experts. Our business is a leader in Europe.
Investment Philosophy and Process
- Our transparent investment process focuses on broad portfolio diversification with active positioning. The team approach, with specialists in regions such as the US, Asia and Europe, combined with an integrated risk management process, enables sound, specific and consistent investment decisions.
- The Convertible Bonds team draws on the combined expertise of the Equity, Corporate Bonds and Trading teams, and benefits from the combined know-how within Union Investment as well as a wide range of external research.
- Union Investment's extensive infrastructure enables us to independently assess the credit quality of all unrated convertible bonds and to assign an internal rating. In addition, we may use self-developed synthetic convertibles* where these are more efficient than convertibles available on the market.
- For sustainable investment criteria, we use SIRIS (Sustainable Investment Research Information System), a research platform developed by Union Investment, which makes sustainability transparent, measurable and controllable in portfolio management.
An investment in the convertible bond asset class may also involve the following risks
- The risk of market-related price fluctuations and yield risk
- Risk of loss of value due to default/insolvency of individual issuers or counterparties
- Increased price fluctuations and default risks possible with high-yield investments and investments in emerging or developing countries.
- The value of fund units is subject to an increased risk of price fluctuations due to the composition of the fund and/or the techniques used to manage the fund.
- In principle, redemption of fund units on each trading day. Redemption may be temporarily suspended in exceptional circumstances. Possibility of limited or no tradability of investments in the Fund, which may also lead to increased price fluctuations.
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