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Philippe Garnier and Christine Delagrave, senior Convertible Bond managers at LBP AM, discuss the advantages of convertible bonds in a context of high uncertainty.
Convertible bonds are, in our view, a particularly interesting diversification asset during periods of high uncertainty like the one we are currently experiencing, due to their asymmetric behavior and performance potential, which fundamentally relies on four drivers - the equity, interest rate, credit, and volatility components.
In 2024, convertible bonds delivered solid returns, capturing a significant share of equity market performance while offering attractive bond carry. In 2025, they prove to be indispensable in an extremely volatile context. "For example, from April 2 to 8, during the announcement of tariffs, stock markets lost more than 10% while convertibles only dropped by 2%," explains Christine Delagrave.
Buoyed by attractive valuations, by their convexity which is a major strength, and by the momentum of the primary market, convertible bonds are emerging in 2025 as a resilient asset class.
Convertible bonds are overrepresented in high-growth sectors that require massive funding, such as energy transition, electric vehicles, artificial intelligence, cryptocurrencies, and defense. In Europe, economic dynamics are supported by stimulus plans and increased military spending in a context of falling interest rates. The European universe is of better credit quality in our opinion. New issues and the current pool offer exposure to these growing sectors.
In Europe, economic momentum is supported by stimulus plans and increased defense spending, all within a context of falling interest rates. In our view, the European universe offers higher credit quality. New issuances and the current market provide exposure to these high-growth sectors.
On the other hand, global convertible bonds offer a broad investment universe, a strong U.S. bias with a focus on tech stocks, and opportunities for geographical diversification (China, South Korea, Japan). " It’s also worth noting that the recent correction in U.S. markets has created attractive entry points.," adds Philippe Garnier.
With €2bn in convertible bond AUMs, LBP AM is one of the leading players in Europe, backed by. "We have a senior team, a rigorous security selection process to best benefit from their convexity, an independent multidisciplinary team of analysts (credit, SRI, equity), proprietary management tools, and cutting-edge quantitative research. And all our funds are SRI and V3 labeled," emphasizes Christine Delagrave.
LBP AM brings all this the expertise to the table – helping you navigate ever-changing markets with clarity and conviction.