Generating returns and managing volatility: the absolute return approach to convertible bonds (May 2016)

The past months have been characterised by an unprecedented low rate environment. The continuous search for yield has pushed institutional investors out of their comfort zone, having to further diversify, to rethink their investment approach and risk budgets within a context of asset allocation optimisation. A further complexity surged with recent heightened volatility of risky assets.

At Generali Investments, we believe that Convertible Bonds are an investment solutions perfectly adapted to this new environment and new challenges. The securities feature an attractive convexity which seems extremely appealing in a context of market uncertainty and return of volatility, and yet low interest rates. We also believe that, besides the traditional convertible bond strategies, introducing a flexible absolute return approach makes a lot of sense.

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