1. Newsroom
  2. No-coupon convertibles in demand
Menu
UBP in the press 14.02.2020

No-coupon convertibles in demand

No-coupon convertibles in demand

Allnews (07.02.2020) - 2019 was an excellent year for the primary market, says Marc Basselier, head of convertible bonds at UBP.


Whether for equity exposure with downside protection, for asset diversification, or for creating asymmetry, newly issued zero-coupon convertible bonds have been going like hotcakes because of their convexity. In the wake of quantitative easing, these hybrid assets – half-way between bonds and equities – can lead to negative yields if the conversion from bond to equity fails to materialise; a seemingly very unsatisfactory return given such bonds’ low ranking in the hierarchy of debt. “Yet they are not unattractive because their performances are linked to those of their underlying equities”, says Marc Basselier, UBP’s Head of Convertible Bonds.

A more diversified universe

Last year saw a clear trend for share buy-backs. Meanwhile the global convertible bond primary market was on fire, with new issues hitting USD 85 billion.

“2019 was an excellent year for the US primary market with USD 60 billion worth of new issues, and one of the best years since 2001 in Europe once it picked up again in the second half of the year”

states Marc Basselier. He adds that in fact some issues were used to optimise balance sheets by financing share buy-backs.

In the past four years some hitherto unrepresented sectors, including takeaway food, software and semiconductors as well as growth companies, have been added to the investment universe. Even some green convertible bond issuers have emerged: Marc Basselier says wind power start-up NeoN’s first small batch in the second quarter got off to a strong start.

Selective bond-picking

But although conversion premiums are way above 20%, are convertible bonds still worth considering given that equities are at all-time highs? “Convertibles have a lifespan of five to seven years, which makes the premiums more than fair”, explains Marc Basselier. There are more important criteria, such as the bonds’ equity-sensitivity and downside protection, he says. “In the European universe, equity exposure is 40% with the bond floor 12% lower. Equally attractive exposure can be found in the luxury sector, for example, with LVMH’s latest issue maturing in 2022, offering a conversion premium of about 20%.”

Convertible bonds

Interview of Marc Basselier by Salima Barragan from Allnews


Basselier_Marc_150x150_2.jpg
Marc Basselier
Head of Convertible bonds

Analisi

Gestione discrezionale – le redini sono in mano vostra

Ogni cliente ha aspirazioni e obiettivi unici, così come è unico il nostro approccio alla gestione di portafoglio discrezionale.

Leggete di più
Expertise

Swiss & Global Equities

Why Swiss equities now? This market offers equity investors the stability and agility they need to navigate this volatile period. 

Read more
Expertise

European Equities

European equities offer unrivalled opportunities in terms of breadth of sector and market exposure.

Read more

Le news più lette

UBP in the press 23.11.2020

Frontier debt comes of age

Financial Investigator (20.11.2020) - Frontier debt has grown significantly over the past decade and now warrants serious consideration as a dedicated allocation in investors’ portfolios.

UBP in the press 18.12.2020

The drift towards thematic investing

Rankia Pro (12.2020) - Interview with Didier Chan-Voc-Chun, UBP’s Head of Multi-Management & Fund Research

UBP in the press 04.01.2021

The rise of UBP’s impact strategy

Funds Society (14.12.2020) - The first strategy in UBP's impact investing platform, Positive Impact Equity, has been going from strength to strength since its inception. Impact investing specialist Yvan Delaplace details the strategy’s investment process and broader sustainability trends in the sector.


Altro da leggere

UBP in the press 18.02.2021

Why renewable energy has come of age in 2020

Environmental Finance (05.02.2021) - What changed to make renewable energy such an investment success story in 2020, UBP’s Mathieu Negre asks

UBP in the press 03.02.2021

Compelling opportunities in Japanese small-cap techs

Funds Society (28.01.2021) - An improvement in corporate governance, a stable government and a leading edge in digitalisation and robotics are making the Japanese small-cap segment a rich source of attractive opportunities for selective investors, says UBP Senior Analyst Cédric Le Berre.

UBP in the press 29.01.2021

Fixed income outlook: Positive environment for credit

Institutional Money (27.01.2021) - Despite an accelerating Covid-19 spread into year-end, risk markets concluded 2020 on a strong note as investors took confidence from the commencement of the vaccine rollout in the US and UK.