investment viewpoints

Convertible bonds: the weather forecast for 2023

Convertible bonds: the weather forecast for 2023
Natalia Bucci - Co-head of Convertible Bonds

Natalia Bucci

Co-head of Convertible Bonds
Arnaud Gernath - Chief Investment Officer, Convertible Bonds

Arnaud Gernath

Chief Investment Officer, Convertible Bonds
Lydia Chaumont - Head of Client Portfolio Managers for Convertibles

Lydia Chaumont

Head of Client Portfolio Managers for Convertibles

Convertible bonds are an all-weather instrument. The optionality embedded in this asset class helped returns and provided a cushion during the challenges of the past two years. Looking into 2023, we expect equity markets to remain challenging but do not foresee a rise in defaults for convertibles. In our view, they offer an effective way to navigate an uncertain macro environment because they participate in any equity upside while still providing downside protection. At LOIM, we offer a broad range of strategies for investors wishing to gain exposure to global convertible bonds.

Key points in our 2023 outlook include:

  • Growth differentiation. Sharply rising interest rates and record inflation affected the performance of the asset class over the past two years. Growth companies, which make up a large part of the convertibles universe, suffered in this environment but we believe that certain names can recover. We differentiate between funded ‘quality’ companies generating excess economic returns and ‘unfunded growth’ names that could continue to underperform
  • Preferred themes. Looking into 2023, there are a number of investment themes and opportunities for convertible bond investors. Inflation has peaked and rate rises could slow although borrowing costs are likely to remain higher for longer. The themes we prefer include: pricing power in an inflationary environment, defensive names with growth potential, insourcing of systemically important industries in the wake of last year’s supply-chain woes, and security – especially of food and energy
  • Track record. Our flagship strategy has been in existence longer than almost any other global convertible product. Our experienced team has a successful track record of generating risk-adjusted returns over the longer term with a defensive management style and a bias to higher quality credits

To read more, please access our 2023 convertibles outlook by using the download button provided.


important information.

For professional investor use only

This document is issued by Lombard Odier Asset Management (Europe) Limited, authorised and regulated by the Financial Conduct Authority (the “FCA”), and entered on the FCA register with registration number 515393.
Lombard Odier Investment Managers (“LOIM”) is a trade name.
This document is provided for information purposes only and does not constitute an offer or a recommendation to purchase or sell any security or service. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This material does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before entering into any transaction, an investor should consider carefully the suitability of a transaction to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. This material contains the opinions of LOIM, as at the date of issue.
Neither this document nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.
Source of the figures: Unless otherwise stated, figures are prepared by LOIM.
Although certain information has been obtained from public sources believed to be reliable, without independent verification, we cannot guarantee its accuracy or the completeness of all information available from public sources.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by LOIM to buy, sell or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change. They should not be construed as investment advice.
No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorised agent of the recipient, without Lombard Odier Asset Management (Europe) Limited prior consent. In the United Kingdom, this material is a marketing material and has been approved by Lombard Odier Asset Management (Europe) Limited  which is authorized and regulated by the FCA.

© 2024 Lombard Odier IM. All rights reserved.