The resurgence of convertibles

CONVERTIBLE SECURITIES

John P Calamos Sr, chairman of Calamos Investments, explains why core convertible allocations may be the answer to investing in a rising, but still volatile, equity market.

Investors around the world are rekindling their interest in convertible securities, an asset class with roots in the US railroad boom of the mid-1800s. As equity-linked securities, convertibles provide the upside of equities with potential downside protection if markets fall. The trick to master with convertibles is creating an asymmetrical balance between risk and return, capturing more equity upside and downside over full market cycles Equity-bond balance The potential benefits of convertibles derive from the ability to convert the security into a predetermined number of equity sh...