Drawing on the asymmetric nature of European convertible bonds within a socially responsible framework
The dual nature of convertible bonds – a bond instrument with an embedded conversion option – allows them to combine the defensive qualities of fixed income securities with the upside potential of equities. This attractive feature is at the root of the asset class’ intrinsic convexity. UBAM – SRI European Convertible Bond aims to provide investors with the asymmetric risk/return profile of convertible bonds within a socially responsible investment (SRI) framework
Key points
- The combination of two areas of expertise: convertible bond management & SRI screening
- A “best-in-universe” socially responsible approach
- A strong alternative to European SRI equities in a volatility-controlled framework
- A strategy compliant with major European labels
Investment case
Convertible bonds have a long history in delivering equity-like returns with much lower volatility over the long term, therefore improving the risk/return profile of a diversified portfolio over a complete market cycle. Being partly exposed to equities, convertible bonds traditionally embed lower sensitivity to interest rate moves than straight bonds of comparable duration. Prospects for the asset class are strong, as ever more companies are turning to convertible bonds for their financing needs, providing deep and growing convex investment opportunities.
Fund concept
With UBAM - SRI European Convertible Bond, UBP offers access to convertible bonds’ unique convexity for investors keen to expose some of their assets, through SRI, to issuers that value fairness and sustainability in investment.
The portfolio aims to maintain a higher average SRI rating than its reference index (the Refinitiv Europe Hedged Convertible Bond Index (EUR)). This is achieved through stringent environmental, social and governance (ESG) criteria, which result in investments on companies that stand out for their commitment to sustainable development. UBP’s convertible bond team develops its own ESG ratings, based on the SRI analysis provided by MSCI ESG Research, with strong emphasis put on governance and environmental aspects. The strategy is managed quantitatively, according to an allocation approach designed to respond to convertible bonds’ specific features, and with the objective to enhance convertible bond market indices’ attractive long-term risk-return profile.
The strategy complies with 3 major European labels: the Austrian “Österreichisches Umweltzeichen” Ecolabel, the French “Label ISR” and the Belgian “Towards Sustainability” Febelfin label.
With reference to the French ISR Label, please find the code of transparence in French here.
