According to Fisch Asset Management, the conventional 60/40 split between equities and bonds continues to be a popular and widely used strategy among professional investors. However, the Swiss asset manager believes that by making a few adjustments – specifically, incorporating a moderate allocation to convertible bonds (CBs) – the traditional asset management approach can achieve superior results while retaining all its benefits.
“Over the last three decades, global CBs generated total returns close to global equity indices and performed better than balanced 60/40 portfolios, but with much lower volatility,” says Ivan Nikolov, Co-Head Convertible Bonds at Fisch. “To be more precise, with their convex (asymmetrical) payoff profile, lower interest rate duration than both investment grade and high yield corporate bonds, and some unique idiosyncratic exposures, CBs can provide meaningful diversification and efficiency throughout the market cycle.”
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