There is an Alternative: Hedged Convertible Bonds

Equities have been highly volatile this year, while fixed income returns have been negative. As a result, many investors feel they have no place to hide.

In this edition of Lazard Insights, Sean H. Reynolds, Managing Director, Portfolio Manager/Analyst at Lazard Asset Management, proposes an alternative asset class: Hedged convertible bonds can potentially benefit from volatility because they have a unique source of return that stems from market volatility itself.

Hedged convertibles can mitigate both interest rate risk and credit risk, which can boost their risk-adjusted return potential relative to many fixed income sectors.

Hedged convertibles can also play a longer-term role in a portfolio, potentially meeting investors’ needs for low duration, diversification, low volatility, downside risk mitigation, or absolute return.

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