Man Convertibles Europe (REMOVED 17-Jul-24)
The Man Convertibles Europe strategy is an actively managed, long-only portfolio of European convertible bonds which aims to generate superior returns through capital appreciation and interest income.
- Concentrated portfolio of approximately 40-60 convertible bonds that offers access to the European convertible bond market with its unique composition of blue chip companies and global market leaders from the medium-size enterprise sector
- Positioned in the balanced area to provide the highest possible convexity and participate in the upside potential of European equity markets while seeking to reduce downside risk
Convertible bonds offer access to the return potential of equity markets, whilst providing potential downside insulation. The embedded conversion option in a convertible combines the benefits of a debt instrument – fixed coupon payments and the option to redeem at maturity at a pre-specific price – with the ability to participate in the upside potential of the underlying equity.
Approach
The key to the strategy’s success is the employment of a well-structured and disciplined top-down/bottom-up investment approach, supported by state-of-the-art systems and a proven risk management process.
Top down
The starting point is a broadly diversified portfolio, which matches the sector allocation of the Thomson Reuters Convertible Europe EUR Index. In the quarterly Man Convertibles Investment Committee meeting, economic and financial market developments are discussed and allocation weights relative to the index decided. This goes as far as doubling or halving the tactical allocation to a sector.
Bottom up
Investments are selected based on their credit profile, the outlook of the underlying equity as well as the technical profile including the structure and features of the convertible bond itself. This selection aims to identify convertibles that are undervalued relative to their fair value and their peers in the investment universe.
This process is supported by
- A proprietary database of around 750 convertibles that qualify for an investment
- State-of-the-art proprietary and external models and tools such as FIS’ Monis
- A dedicated quant analyst assisting with heavy data modelling, including scenario analysis and assessment of key performance drivers
- A credit specialist assessing credit profiles of new issuers and companies with a weaker credit profile to monitor company credit risk within the strategy
Exposure management
- Employment of an active approach to managing the overall equity sensitivity of the portfolio that uses CTA-style trend signals to support decisions
- Implementation is conducted within a well-defined framework of rules, using a combination of shifts between higher and lower-delta convertibles, index futures (only to reduce exposure), and cash holdings
- All unwanted currency risk is hedged, while a maximum of 20% of total exposure may remain unhedged
| Approach | Long-only |
| Asset Class | Credit |
| Geographic Focus | Europe |
| Reference Index | Thomson Reuters Convertible Europe EUR Index |
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