Convexity but not at all costs

    Convexity but not at all costs

    Positive convexity tends to be a highly desirable feature for institutional investors, yet the means to this end can differ vastly. Indeed, the many paths leading to asymmetric returns vary in terms of method and cost. While our solutions approach convexity from different angles, they are united in their goal of optimising asymmetry in the most cost-effective way possible.

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    Convertibles build in convexity for ups and downs

    Convertibles build in convexity for ups and downs

    As a hybrid asset class, convertible bonds do a remarkably simple thing: they provide natural, long-term convexity at a reasonable price. In fact, convexity is built into convertibles the way cupboards are built into kitchens: it is integral to the proposition.

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    Alternatives, mispricing and convexity

    Alternatives, mispricing and convexity

    Our Alternatives team constructs highly-bespoke strategies that are naturally, structurally convex while also featuring limited or no negative cost of carry. Such opportunities seek to exploit mispricing in the market in order to maximize the positive convexity of investors’ exposure. Harvesting such opportunities requires specialists to overcome the ample barriers to entry.

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    Multi-asset and managing downside risk

    Multi-asset and managing downside risk

    As investors continue to focus on downside risks, we have tailored our multi-asset approach to help manage drawdowns while also capturing upside participation. Through precise design, we seek to embed convexity into our portfolios, and review strategies with appealing asymmetry.

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    Improving convexity in credit

    Improving convexity in credit

    Fixed income as an asset class is inherently negative convexity. To reduce the impact, our fixed income team focuses on areas of the credit spectrum with better ratings resilience. We believe that the crossover area of bonds – rated BBB to BB – could help investors improve their convexity exposure. Our way of building portfolios based on quality further enhances convexity.

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