A pocket guide to convertible bonds

Mirabaud Asset Management's head of convertible bond management, Renaud Martin, outlines a guide to navigating an interesting area of the bond market which has historically been little understood by investors.

What is a convertible bond? A convertible is a type of bond that the holder can convert into shares of common stock in the issuing company or cash of equal value, at an agreed-upon price. It is a hybrid security with debt- and equity-like features. Although it typically has a coupon rate lower than that of similar, non-convertible debt, the instrument carries additional value through the option to convert the bond to stock, and thereby participate in further growth in the company's equity value. The investor receives the potential upside of conversion into equity while protecting d...