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Alternative Market Briefing

Asian convertibles offer performance with lower volatility

Thursday, November 21, 2013

Beverly Chandler, Opalesque London:

RWC, the $7.3bn active investment manager, has recently taken a look at Asian equities, finding that demographics and higher growth rates are among the factors that drive investor interest in Asian equities but while finding outperforming Asian equity managers can be rewarding, this often comes with the undesirable by-product of high volatility.

Davide Basile, Head of Convertible Bonds at RWC, comments that it is surprising that more investors do not use the convertible bond market to access the Asian story: "When we compared the performance of Asian convertible bonds with global convertibles and equities over the past decade we found that the asset class can offer investors a number of benefits. Asian equities outperformed global equities substantially over this period, which is part of the reason why Asian convertibles outperformed global convertibles. However, the convertibles market in Asia shows some notable features" he says.

"It is fair to say the asset class has performed well through the business cycles of the past decade beating global equities and delivering returns similar to Asian equities, however if you look at that outperformance it comes with much lower volatility. If you look at the period from 2000 to October 2013 the MSCI Asia ex-Japan Total Return index returned 139.9% with annualised volatility of 21.7%, whereas the UBS Asia Focus Convertible Bo......................

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