Convertibles: Capitalizing on Innovative & Disruptive Secular Growth with Lower Volatility

We believe that investors should seek to invest in companies that are addressing unmet needs and innovating the products and services of tomorrow. These companies typically exhibit higher rates of growth and growth that is secular, not tied to the ebbs and flows of the broader economy.

We find innovation and disruption in all sectors; however, they are particularly prevalent in healthcare, technology and consumer sectors. While mega-cap tech such as Apple, Google and Facebook get all the press, we believe some of the best investment opportunities are in small- and mid-cap companies, those earlier in their corporate lifecycle, often playing the disruptor role. Opportunities we see include cloud computing, machine learning, artificial intelligence, blockchain technology, smart cars, robotic surgery, gene therapy, synthetic biology and e-commerce among others.

Convertible bonds, a hybrid security with equity- and bond-like characteristics, offer access to these fast-growing companies and sectors, which are primarily issued by small- and mid-cap companies for growth capital. Convertible bonds’ equity component (option to convert into common stock) can provide investors the opportunity to participate in most of the equity upside, while their bond attributes (coupon and principal) offers investors potential downside protection with less volatility than equities.