What can investors expect from convertibles after 'best year since 2013'?

Convertible bonds are set to record their best year of absolute performance since 2013 this year, with the TR Global Focus Hedged Convertible Bonds Index (USD) up 7.25% as at the end of October.

The growth bias inherent within the asset class has been a benefit, while regional skews towards Europe and Japan, and the falling volatility regime, have acted as a significant headwind. Going into 2018, we see the asset class set to benefit from the late-cycle reflationary market environment, with rising interest rates that could potentially lead to a pick-up in market volatility. The asset class provides a balanced exposure to financial markets, with low interest rate sensitivity and a dynamic equity sensitivity so that it becomes more equity-like to the upside and more bond-like t...