Despite headwinds, equity markets continue to rise. The S&P 500 hit a fresh record high on December 6 2024; high-yield credit spreads remain tight, and the macroeconomic backdrop and supportive monetary policies provide reasons for optimism. But, “Where do we go from here?” is the question Polar Capital raises.

The asset manager questions how to allocate capital effectively to capture upside while mitigating downside risk. Convertible bonds are proposed as a potential solution, offering participation in equity market gains alongside a degree of downside protection.

“As equities rise, convertibles participate to an increasing degree, until they trade in lock-step with equities…as equities fall, the equity sensitivity of a convertible progressively falls towards zero,” David Keetley, Fund Manager at Polar Capital.

Read the full insight here.