Q&A: RWC's quick guide to convertible bonds

Esther Watt, portfolio manager on the RWC Convertible Bond team, answers key questions about the convertible bonds sector.

What is a convertible bond? A convertible bond differs from a regular bond in that it has an inbuilt option allowing the holder to trade it in for - or convert it to - shares in the issuing company should the share price rise by a predetermined amount. Like other fixed income instruments, the issuer pays a fixed coupon until conversion or maturity and the holder has a claim on the company. More uniquely, convertibles offer the investor the potential for upside participation should the company's equity perform well. Is the issuer always the same as the underlying equity? Not alw...