In the current capital market environment, convertible bonds are increasingly coming into the focus of institutional investors. This is driven by a combination of pronounced volatility in equity markets and widening dispersion between individual sectors and stocks. At the same time, issuers are making intensive use of the instrument, as convertible bonds frequently offer more advantageous financing conditions compared to conventional bonds or equity measures. Alken Asset Management therefore considers the structural framework for the segment to be exceptionally sound.
Natalia Bucci, Head of Fixed Income and portfolio manager at Alken Asset Management, points to the convex profile of the asset class. Volatility and dispersion did not represent a burden, she noted, but rather constituted a strength of the segment. Investors could participate in equity market gains, whilst the bond floor served as a protective buffer during pullbacks. This relationship between return potential and capital protection was currently in strong demand among market participants.
Access to growth sectors and a buoyant primary market
Convertibles enable exposure to structural growth areas such as artificial intelligence, semiconductor technology and data centres without subjecting investors to unmitigated equity price risk. Historically, instrument valuations are often more moderate than those of the underlying equities. The central performance driver is the delta, meaning sensitivity to the share price, while interest rate duration and credit spread beta play a subordinate role.
- —High issuance activity: Following record volume in 2025, brisk activity in the primary market continues in 2026.
- —Attractive features: Higher coupons and lower conversion premiums improve asymmetry in favour of investors.
- —Portfolio diversification: Typical remaining maturities of one to two years limit interest rate risk compared to traditional fixed-income securities.
Unlike the high-yield bond market, the convertible bond segment is characterised by a significantly higher proportion of technology, healthcare and growth companies. This offers investors seeking to broaden their fixed-income allocation additional diversification with a relatively short duration. Natalia Bucci emphasises that while convertible bonds do not completely replace traditional corporate bonds, they represent a functional addition to a fixed-income portfolio.
Stock selection and valuation in fund management
Despite recent headwinds from weaker equity valuations, interest rate rises and a heavy volume of new issues from the technology sector, the portfolio of the Alken Fund - Global Convertible stood out through targeted single-stock selection. Value contributions came from positions in Cloudflare as well as European stocks ASML and Soitec, among others. Conversely, holdings in Uber and DoorDash weighed on overall performance.
In light of ongoing geopolitical uncertainties, the portfolio management team is maintaining stringent valuation discipline. Price pullbacks are being used to add to core positions on improved terms, accompanied by selective subscriptions in a primary market that remains receptive.
