Mirabaud - Discovery Convertibles Global IH cap. CHF

Performance update

Equities roared back in May, with all large equity indices (except for the Nikkei) in positive territory for the year. The US and China agreed to de-escalate, with the US agreeing to a 90-day cut of tariffs on Chinese goods from 145% to 30%, while China reduced tariffs on US goods from 125% to 10%. However, numerous hurdles remain, including with allies. The rates market continued to cause angst among investors as budget and deficit concerns re-ignited. 

Small & mid-cap (SMID) convertible bonds' underlying equities outperformed broad global SMID equity indices (+8.91% vs. +5.61%), while convertibles outperformed their delta-implied moves, capturing 61% of the positive performance of their underlying equities. From a regional perspective, on an absolute basis, North America contributed the most to fund performance, followed by EMEA and APAC. Japan brought up the rear. From a sector standpoint, IT and materials were the main positive contributors on an absolute basis, while only consumer staples detracted. At the security level, the leading relative positive contributors were Box 0% 15/01/2026, Blackberry 3% 15/02/2029 and Varonis 1% 15/09/2029. The main relative detractors were Centrus Energy 2.25% 01/11/2030, Transmedics 1.5% 01/06/2028 and IRhythm 1.5% 01/09/2029.

Portfolio activity

During the month, we exited Lumentum 1.5% 15/12/2029, Wayfair 3.5% 15/11/2028, World Kinect 3.25% 01/07/2028 and Saipem 2.875% 11/09/2029. We initiated a new position in the primary market in Mirion Technologies 0.25% 01/06/2030 and built new positions in the secondary market in Cyberagent 0% 16/11/2029, Guardant Health 1.25% 15/02/2031, RealReal 4% 15/02/2031 and Kobe Steel 0% 13/12/2030. Sector-wise, IT represents our largest exposure at 31.15% (2.32% OW) followed by materials at 20.44% (9.53% OW), healthcare at 10.89% (2.97% UW), consumer discretionary at 10.48% (1.70% UW), industrials at 9.65% (3.32% UW), real estate at 5.76% (1.38% OW), financials at 5.64% (0.23% OW), consumer staples at 2.84% (0.00% OW), communication services at 1.73% (0.48% UW) and utilities at 1.52% (0.39% OW). Geographically, the breakdown is North America at 69.58% (1.81% OW), APAC at 5.88% (0.07% OW), EMEA at 7.32% (3.13% UW) and Japan at 17.33% (1.36% OW).