Growth of convertible bonds' investor base has 'drastically' reduced sector's risk

Convertible bonds (CBs) are most effective at delivering you closer to your asset mix 'sweet spot' than you would be by guessing your equity/bond allocations, writes NN Investment Partners' Tarek Saber.

The asset class offers a bridge between fixed income and equity markets, has performed very well in rising interest rates environments and has historically performed well in low-yielding environments as witnessed by what happened in Japan. While we are unlikely to see the same returns from fixed income in the next five years as we have seen in the last five, balanced CBs give the best risk-adjusted return of any traditional asset class. Balanced CBs exclude mandatory CBs and synthetic CBs, and I also exclude 'deep in the money' and 'deep out of the money' CBs. Convertible bonds: The m...