Investing in convertible bonds

Although they are not a new asset class, convertibles are enjoying a surge of popularity

The virtues of convertible bonds have often been overlooked. Since 1997, this asset class has outperformed global equities. However, superior performance has not been made at the expense of higher volatility. This reflects the unique features of an asset class which combines a vanilla corporate bond with a warrant or option on the issuing company's common stock. Analysing returns for all the major asset classes (equity, convertible bonds, fixed income and property) between January 1998 and March 2008 shows just how attractive the risk / reward characteristics of convertible bonds are. Ove...