In a year marked by rate regime shifts, valuation extremes, and geopolitical curveballs, one asset class is standing out for all the right reasons: convertible bonds.
Often overlooked in calmer times, convertibles are built for exactly this kind of environment ─ one where uncertainty is constant, and directional conviction is rare. Here’s why investors are taking a fresh look:
Participation rate of global convertible index since "Liberation Day" (2 April to 30 June 2025)
Convexity in action
Convertible bonds (CBs) are regaining their hallmark asymmetry, capturing more upside than downside of their underlying equities, with 2024 delivering 20% more upside capture1. This unique return profile is especially powerful in sideways or volatile markets conditions that define 2025.
During the April sell-off, they demonstrated their defensive qualities by cushioning losses, and participated meaningfully in the subsequent rebound. From 2 April’s ‘Liberation Day’ to 30 June, global CBs captured 52% of the upside of their underlying equities (+5.29% vs. +10.22%)2, showcasing their renewed asymmetric behaviour.
Return of global convertibles vs. equity/high yield indices
A source of alpha, with less risk
While it’s well known that over the long term, convertibles have delivered equity-like returns with much lower volatility, it’s also true for the more recent period. Global CBs have outperformed other classes both YTD (+7.33% against +6.80% for global equities3 and +4.65% for global high yield4) and over one year (+15.93% vs +14.03% for global equities3 and +11.78% for global high yield4) with less than half the volatility of the MSCI World Index.
In this context, let’s not forget their strong diversification benefits: close to 60% of issuers do not have any other public debt outstanding while their median market is USD7bn compared to USD21bn for the MSCI World5.
Global convertible new issuance by year
Structural tailwinds
In 2024, we noted (here, here and here) that convertibles were going through significant changes and were ripe for delivering on their promises. They have and we believe they will continue to do so.
The primary market remains strong, with more than USD70bn issued YTD6, tracking ahead of 2024’s pace and edging closer to the records of 2020-2021. Conditions are still in favour of investors with an average coupon of 2.5% – twice the average of the record Covid years7.
Additionally, this means we have numerous vehicles with which to gain exposure to a diversified set of opportunities among which small and mid-caps (SMIDs) appear increasingly interesting. Indeed, despite reaching an inflection point, SMIDs still trade at a discounted valuation compared to historical and larger caps, while broader convertible underlying equities have lagged the MSCI World by 64% since the end of 20208.
All the performance drivers that made the heyday of the asset class are now back into play.
Want to know more? Click here to explore our convertible bond strategies
1 Source: Mirabaud Asset Management, 2024.
2 Source: FTSE Global Focus Index Hedged (USD).
3 Source: MSCI World Index USD Hedged to 30 June 2025.
4 Source: Bloomberg Global High Yield Index USD Hedged to 30 June 2025.
5 Source: MSCI, FTSE Russell, 30 May 2025.
6 Source: Mirabaud Asset Management, 30 June 2025.
7 Source: Mirabaud Asset Management.
8 Source: MSCI World USD Hedged, date 30 June 2025.
Convertible bonds
Now is the moment
IMPORTANT INFORMATION
This marketing material contains or may incorporate by reference information concerning certain collective investment schemes ("funds") which are only available for distribution in the registered countries. It is for your exclusive use only and it is not intended for any person who is a citizen or resident of any jurisdiction where the publication, distribution or use of the information contained herein would be subject to any restrictions. It may not be copied or transferred.
This material is provided for information purposes only and shall not be construed as an offer or a recommendation to subscribe, retain or dispose of fund units or shares, investment products or strategies. Before investing in any fund or pursuing any investment strategy, potential investors should take into account all their characteristics or objectives as well as consult the relevant legal documents. Potential investors are recommended to seek prior professional financial, legal and tax advice. The sources of the information contained within are deemed reliable. However, the accuracy or completeness of the information cannot be guaranteed and some figures may only be estimates. In addition, any opinions expressed are subject to change without notice. There is no guarantee that objectives and targets will be met by the portfolio manager.
All investment involves risks, returns may decrease or increase because of currency fluctuations and investors may lose the amount of their original investment. Past performance is not indicative or a guarantee of future returns.
This communication may only be circulated to Eligible Counterparties and Professional Investors and should not be circulated to Retail Investors for which it is not suitable.
Issued by: in the UK: Mirabaud Asset Management Limited which is authorised and regulated by the Financial Conduct Authority. In Switzerland: Mirabaud Asset Management (Suisse) SA, 29, boulevard Georges-Favon, 1204 Geneva, as Swiss representative. Swiss paying agent: Mirabaud & Cie SA, 29, boulevard Georges-Favon, 1204 Geneva. In France: Mirabaud Asset Management (France) SAS., Spaces 54-56, avenue Hoche, 75008 Paris. In Luxembourg, Italy and Spain: Mirabaud Asset Management (Europe) SA, 6B, rue du Fort Niedergruenewald, 2226 Luxembourg. The Prospectus, the Articles of Association, the Key Information Document (KID) as well as the annual and semi-annual reports (as the case may be), of the funds may be obtained free of charge from the above-mentioned entities and on the webpage: All Mirabaud Funds | Mirabaud Asset Management . Further information on sustainability is available at the following link: Responsibly sustainable | Mirabaud Asset Management.
Continue to
