Sun, Feb 1, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

Asian convertibles offer performance with lower volatility

Thursday, December 05, 2013

RWC, the $7.3bn active investment manager, has recently taken a look at Asian equities. The firm reports that demographics and higher growth rates are among the factors that drive investor interest in Asian equities but finds that 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 Bond Index returned 133.2% over the same period but with only a third of the volatility at 6.9%."

Beyond that, Basile reports that: "Additionally, valuations of Asian convertibles show they are trading at a discount to fair value, especially versus other regions, thus representing a sensible entry point for investors today. The general credit fundamentals are relatively strong, and yet the market is often under researched due to smaller issuance sizes. Given the majority of convertible buyers are from the long-only, large global funds this leaves an opportunity for a smaller dedicated regional convertible bond fund, especially as we have seen a significant pick up in Asia convertible issuance in recent years which we believe is set to continue."

RWC believes that the asset class continues to demonstrate advantages. The firm launched the RWC Asia Convertible Fund two years ago for investors who wanted exposure to the region via the convertible asset class. Since inception June 2011 to end October 2013 the fund has returned 7.9% with a volatility of 5.0%, again outperforming Asian equities by 3.2% with under a third of the volatility (MSCI Asia ex-Japan TR index had 18.7% volatility over the same period), as well as outperforming the UBS Asia Focus Convertible Bond Index which returned 4.9% over the period.

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: Ex-Citi trader launches 'sleep-at-night’ long/short equity fund[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: After working at Citi's proprietary trading desk, managing a large portfolio between 2008 and 2011, Joel S. Salomon founded SalaurMor Management in New Yor

  2. Investing - U.S. investors favor currency hedged Europe ETFs as euro tumbles, Quants win back investors as Swiss franc fuels volatility gains, David Einhorn's $7bn hedge fund is loading up on this stock, Hedge fund BlueMountain Capital unveils Ocwen Financial short, claims default on notes[more]

    U.S. investors favor currency hedged Europe ETFs as euro tumbles From Reuters.com: U.S. investors stung by the falling euro who want to stay invested in Europe are turning to exchange-traded funds designed to strip out the impact of the region's currency. The biggest among so-called "cur

  3. News Briefs - Millennials use tech tools to jump into investing, Winklevoss twins to launch bitcoin exchange with FDIC insured deposits, Robertson’s legacy from hedge funds to New Zealand, Real estate managers exploring smaller open-end funds[more]

    Millennials use tech tools to jump into investing It is the Facebookification of monetary investing. From social networking platforms that enable young investors to stick to every other's stock-picking mojo, to internet sites for initially-timers hungry for a piece of the Silicon Valley

  4. Update: Prosecutors seek 12 years for hedge fund manager Francisco Illarramendi[more]

    Komfie Manalo, Opalesque Asia: Federal prosecutors have asked the court to sentence convicted hedge fund manager Francisco Illarramendi to 12 years imprisonment for running an elaborate Ponzi scheme that bilked investors hundreds of millions in dollars, including a Venezuelan pension fund, report

  5. Institutions - Ontario pension fund leader calls all asset classes ‘expensive’, Taiwan's BLF plans $2bn in alternative mandates[more]

    Ontario pension fund leader calls all asset classes ‘expensive’ From WSJ.com: The head of one of the world’s largest pension funds said that across asset classes, “everything is expensive.” Ron Mock, who leads Canada’s $141 billion Ontario Teachers’ Pension Plan, said that the plan would