The top five asset classes to target in 2017
By Kristen McGachey, 22 Dec 16
As 2016 draws to a close, these are some of the key areas investors are pinning their hopes for the new year on.
In an “environment in which nobody wants bonds and the majority are nervous about equities,” convertible bonds remain a decent alternative, according to senior fund manager in GAM’s non-directional equity team, Jonathan Stanford.
He continues: “The short duration characteristic of convertibles prevents over-exposure to rising interest rates. As a spread asset, the credit component allows for greater yield opportunities or valuation upside in a relative value arbitrage scenario. The rise in interest rates would usually call for an increase in primary market activity in convertible bonds. The comparative competitiveness toward other assets will increase, prompting companies to choose convertible debt issuance over corporate bonds or bank loans. This will allow for more diversity, a renewed pool of assets and greater liquidity. The possibility of inflation, backed by stronger economic growth, would bode well for the equity market, and thus would allow convertible bonds to appreciate thanks to their strong equity exposure, and further credit tightening.”
Tags: Investment Management
