Mirabaud - Convertibles Global A dist. USD

Performance update

June was anything but a quiet start to the summer, with investors climbing the wall of worry once again. June finished with no new trade deals inked ahead of the end of the 90-day pause. The Federal Reserve tested the market with the idea of early rate cuts, with Waller/Bowman being the first mouthpieces to speak while Powell reiterated his watch-and-wait stance. The Israel/Iran war concluded after a ceasefire was announced following 12 days of exchanged strikes. Despite all this volatility, global equities printed new highs while credit crept tighter, the US dollar moved lower and the VIX fell below 17.

Convertible bonds' underlying equities significantly outperformed broad global equity indices, while convertibles lagged their delta-implied moves, capturing 43% of the positive performance of their underlying equities, mainly due to softening valuations on the back of a deluge of new issues. From a regional perspective, on an absolute basis, every region except for EMEA contributed to performance, with the US and APAC leading. From a sector standpoint, IT, financials and industrials were the main positive contributors on an absolute basis, while consumer discretionary, healthcare and utilities detracted. At the security level, the leading relative contributors were Fortuna Mining 3.75% 30/06/2029, Grab 0% 15/06/2030 and Wisdomtree 3.25% 3.25% 15/08/2029. The main relative detractors were Echostar 3.875% 30/11/2030, MP Materials 3% 01/03/2030 and Spotify 0% 15/03/2026.

Portfolio activity

During the month, we exited Digital Realty Trust 1.875% 15/11/2029, Snowflake 0% 01/10/2029, Guidewire 1.25% 01/11/2029 and Alphawave 3.75% 01/03/2030. We initiated new positions in the primary market on Grab 0% 15/06/2030, SF Holdings 0% 08/07/2026, Shoucheng 0.75% 07/07/2026, Chow Tai Fook 0.375% 30/06/2030, Cyberark 0% 15/06/2030 and Golar 2.75% 15/12/2030. We built a new position in the secondary market in Equinox 4.75% 15/10/2028.

Sector-wise, IT represents our largest exposure at 26.68% (3.58% OW), followed by industrials at 17.43% (6.65% OW), consumer discretionary at 16.76% (1.39% OW), financials at 10.42% (1.74% OW), materials at 6.94% (1.53% OW), healthcare at 5.91% (4.54% UW), communication services at 3.98% (1.21% UW), utilities at 2.93% (8.77% UW), and consumer staples at 2.56% (1.64% OW). Geographically, the breakdown is North America at 52.02% (10.39% UW), APAC at 28.64% (11.89% OW), Japan at 9.52% (3.59% OW) and EMEA at 9.36% (5.19% UW).