Thibaut Bailly
Senior Portfolio Manager, GMC | Global Multi-Sector Credit Group – Convertible Bonds
The global convertible bond market: an incubator for high-growth companies
At UBP, we see the global convertible bond market as a growth-oriented asset class with performance primarily driven by the equity component of convertible bonds.
UBP has been a pioneer in the management of convertible bond portfolios since 1999. In December 2024, our expertise was fully integrated into the GMC | Global Multi-Sector Credit Group.
This integration has enabled the strategy to draw on the macroeconomic, credit, relative‑value and risk management expertise of the GMC Group.
The convertible bond market serves as an incubator for future high-growth companies and industries, enabling investors in the convertible bond market to benefit from the ongoing AI revolution.
Why invest in convertible bonds?
Portfolio diversification
Convertible bonds can provide meaningful diversification benefits in both bond and equity portfolios. In each case, adding convertible bonds can help dampen portfolio volatility. Alongside an allocation to bonds, convertible bonds can also improve returns.
Allocating to high-growth companies
The convertible bond market serves as an incubator for high-growth companies and industries, offering exposure to transformative sectors such as AI, semiconductors, cybersecurity, energy infrastructure, electrification, and rare earths.
Equity sensitivity
The global convertible bond market offers indirect exposure to small‑ and mid‑cap stocks, ideally complementing an allocation to large-cap stocks.
What are convertible bonds?
Convertible bonds offer the best of both worlds: equity-like features that allow participation in equity market upside, and bond characteristics, such as coupons, that help limit volatility and drawdowns. This combination creates an asymmetric risk/return profile due to the embedded call option in the instrument. Typically, the option gives the bondholder the right to convert the bond into the issuer’s equity under certain conditions.
A distinctive approach to convertible bond investing
The investment process is aligned with GMC I Global Multi-Sector Credit’s investment principles which are founded on three key pillars:
1. Fundamental analysis as the cornerstone of portfolio construction;
2. Relative value to optimise the portfolio’s risk/return profile;
3. Macroeconomic oversight to evaluate and manage major portfolio opportunities and risks effectively.
The convertible bond specialists are supported by the Bottom-Up Committee that assesses sector and issuer-level opportunities, focusing on the critical assessment of equity-linked profiles and risks within the convertible universe. The team aims to maintain medium-to-high equity sensitivity over the investment cycle
Get in touch with our experienced convertible bond team
As a global allocator in the convertible bond market, the GMC Group manages its flagship Convertible Bond strategy along with regional mandates, notably in the European convertible bond market.
“Integration within the GMC | Global Multi-Sector Credit Group has allowed us to refocus our portfolio management on identifying investment opportunities in the global convertible bond universe, particularly among high‑growth companies.”
“The global convertible bond market provides exposure to small- and mid-cap companies positioned in high‑growth sectors with the potential to be the next leaders in their fields, notably those with exposure to the AI revolution.”
Investor Insights
Convertible bonds are generally issued by mid-sized, high-growth companies in various sectors and notably in the technology sector. Investors in the convertible-bond market can benefit from this global opportunity that is set to capture tomorrow’s growth stories.
Convertibles are categorised according to their equity sensitivity:
- Bond-like (equity sensitivity <30%)
- Balanced (equity sensitivity 30–50%)
- Equity-like (equity sensitivity >50%)
Equity-like convertible bonds offer an equity exposure for fixed income investors.
Equity sensitivity measures a convertible bond’s price change for a 1% move in the underlying stock. All other things being equal, a convertible bond with 50% equity sensitivity is expected to capture 50% of its underlying equity’s movements.
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