Mirabaud Sustainable Convertibles Global Strategy | EN

Fully ESG-integrated

We fully integrate environment, social and governance principles into the investment process, which amplifies convexity. ESG materiality is at the core of our approach and we look to understand what extra-financial risks and opportunities companies are facing, the potential financial impact and how they concretely respond to these risks and seize those opportunities.

High conviction pure-play strategy

We invest solely in convertibles, with no exposure to synthetic securities and in order to express our convictions, we have a high weighting to off-benchmark positions. Through proprietary research, we apply our own rating methodology so we can confidently invest in companies that don’t have an official rating by a credit agency.

Dynamic approach

We manage positions actively because dispersion within markets always provides opportunities. We actively focus on delta so the strategy becomes more sensitive to equities or bonds depending on the market environment.

Maximising convexity

We focus in a smaller segment of the convertible bond universe that provides the best asymmetric profiles. This allows us to capture upside in rising markets while limiting downside in falling markets. An overall balanced convertible profile is pursued in a well-diversified portfolio across regions and sectors.

Mirabaud Convertible Bonds

Tailwinds for the convertibles asset class

Lower interest rate risk

We expect inflation to increase. In this environment, convertibles provide duration protection because they have a negative correlation to government bonds and are positively correlated to equities and corporate bonds. We expect equity returns will continue to be the primary driver in the near to medium-term.

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High levels of new convertible issuance

Convertible bond issuance is strong, reaching an all-time high in 2020, bringing more names to consider in a range of businesses with compelling long-term fundamentals in every region, as well as replacements for holdings that have become too bond-like or equity-like. We expect this trend to continue as companies accelerate their capital raising efforts.

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Convertibles remain attractively valued

We currently think valuations are attractive in convertibles, which remain cheaper relative to their long-term fair value, supported by higher market volatility as a result of the pandemic. Today valuations are a greater source of alpha than medium-term risk for the asset class.

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Mirabaud Sustainable Convertibles Global

In 2020, the Fund was awarded the SRI Label, created and supported by the French Ministry to raise the visibility of sustainable investment products.

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Engagement Report : Mirabaud Convertible Bonds

Our Key Characteristics

Lower equity sensitivity

We have reduced equity sensitivity relative to the benchmark given the scope for elevated levels of market volatility as we move through the pandemic. Any market correction will provide a good entry point to raise our equity sensitivity.

Attractive fixed income profile

We expect shorter-duration and higher-yielding assets to outperform high-quality long-duration in the coming months. We have a higher level of credit relative to the benchmark, where the portfolio credit rating is equivalent to BB*, with a blend of investment grade and high yield names.

*Source: Mirabaud Asset Management as at 31/1/2021.
Benchmark is Rifinitiv Global Focus CB Hedged USD

Small-cap focus

We expect smaller companies to outperform because they combine a high level of cyclical exposure, which will lead to a good rebound in profitability with the unlocking of economies, with cheaper relative valuations.

We believe in a pure-play focus on convertibles where issuers have a sustainable focus to maximize convexity. We do not hold synthetic securities or options, which means the portfolio is completely transparent
Nicolas Cremieux
Portfolio Manager - Mirabaud Convertible Bonds Strategy

The team behind the strategy

Lead management has been working together since inception in 2013
A combination of trading and fundamental experience
60 years of combined experience in convertibles, having faced all phases of the credit cycle