Bermuda-headquartered Lazard Asset Management has launched a fund focusing on convertible bonds that are likely to experience recovery in their valuations.
The actively-managed fund will specifically seek investment opportunities presented by sectors or regions that have been underperforming or that are undervalued from either a credit or equity standpoint.
Convertible bonds’ pattern of return is known as “convex”, meaning they can offer equity-market participation in a bullish environment and downside protection when equity markets are falling, the firm said.
The Lazard Global Convertibles Recovery Fund will aim to take full advantage of this convexity with an anticipated annualized yield of more than 6.0%.
Arnaud Brillois, portfolio manager and analyst at Lazard Asset Management, said: “Sectors that have been heavily impacted by the downturn are likely to use convertible bonds as their primary financing instrument since convertible bond coupon payments are relatively low, making issuance attractive in times of widening credit spreads.
“Further, convertible bonds have an embedded call option, so issuers receive a higher price when volatility is high, creating additional incentive for companies to issue convertible bonds.”
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