Asset classes

Our philosophy

Our investment philosophy is underpinned by six core beliefs, which are summarised below:

The asymmetric return profile of convertible bonds generates superior risk-adjusted returns over the medium- to long-term. Empirical evidence suggests that convertible bonds have historically participated to a greater extent in upward stock movements than in downward movements. This asymmetric return profile gives convertible bond investors an edge, as they can exchange a relatively small upside exposure for a significant amount of downside protection.

Convertible markets are not fully efficient; pricing disparities exist, and these opportunities should be exploited.
Mispricing in the convertible market is not uncommon. Product characteristics and the disparate nature of investor groups create pricing inefficiencies.
We believe that by combining our proprietary research with state of the art valuation models and the insight of our global investment team, we have a significant advantage in identifying and capturing buying opportunities created by mispricing.

Aviva Investor’s proprietary research capabilities and industry contacts provide unique insight into global convertible bond markets.
The scale of our operations provides us with significant advantages in terms of our investment process. Aviva Investors has around 120 investment professionals covering equity and bond markets globally, a dedicated asset allocation team, and in-house economists. Our investment infrastructure contributes valuable insights to all aspects of our convertible bond investment process.
Furthermore, the depth of our external relationships with brokers, analysts, and third-party researchers, secures us significant bargaining power including access to new convertible bond issues.

A global remit is critical; and a regional approach to asset allocation can add significant value.
The level of issuance in convertible bond markets has a significant impact on market valuations, especially during periods of low supply. As investor appetite for convertible bonds is relatively inelastic (that is, driven by regional long-only investors) periods of low issuance (or supply) have tended to result in rich valuations. The advantage of a global remit is that our Aviva Investors - Global Convertibles Fund is able to source attractive buying opportunities from the widest possible market, while regional funds do not have this flexibility.

We believe that convertible bond investment decisions should be grounded in fundamental analysis.
Our investment process focuses on stock selection. Ensuring the quality of the underlying equity and credit is prerequisite to investing in any convertible issue, and we apply strict guidelines to our funds’ overall credit quality.

Managing both a long-only and convertibles arbitrage fund achieves significant synergies.
We manage a global convertible bond arbitrage fund alongside regional and global long-only strategies. We believe this provides unique insight into global convertibles markets, ensuring that our investment team considers the pricing influences of both the long-only investors and the arbitrage funds, each of which represent around 50% of the market.