Wealth managers flock to convertibles as volatility rises

Wealth managers have been reducing allocation to equities in favour of convertible bonds as a hedge against volatility, following a strong run higher for equity markets.

Although the VIX index, used to measure equity market volatility, has remained relatively low so far this year, it has risen from the ultra-low level (under 12) seen in December and is now hovering closer to the 14 mark. Many investors expect volatility to rise further in the next few months, after a sharp rally in many equity markets, particularly considering the proximity of the expected rate hike in the US and the general election coming up in the UK. Wealth managers have been reducing equity allocations and using convertible bonds to dampen the volatility of their multi-asset port...