Outright Convertibles
Outright Convertibles: Equity-like Returns with Bond-like Risk
SSI’s Outright Convertible products seek to add value by producing equity-like returns with bond-like risk. Utilizing both quantitative and fundamental analysis to determine the best portfolio candidates, SSI’s portfolio team constructs a diversified portfolio of convertible bonds and convertible preferred stocks that have been evaluated on relative valuation and risk attributes.
Benefits of Outright Convertibles include: income stream of a bond, relative safety of principal, growth potential of common stock and reduction of equity market risk. SSI’s Outright Convertible portfolios are opportunistic in that they are geared towards selecting convertibles that have low conversion premiums and investment value premiums, are “cheap” when compared to their theoretical value, have good call protection, and the underlying equity has strong fundamentals.
SSI has successfully managed outright convertibles using this investment process since 1975. In addition, SSI's expertise in market-neutral strategies and short selling has been honed by the firm's 37 years of experience in the alternative marketplace.
Outright Convertibles
- SSI’s Outright Convertible Strategy seeks to produce excess returns above the Merrill Lynch All Convertibles (VXA0) Index. Portfolios employing this strategy contain ~120 convertible bonds and/or preferreds. All credit ratings are considered. Historically, this strategy has captured 2/3 of the stock market appreciation with less risk.
Outright Convertibles: Investment Grade
- SSI’s Outright Convertible Investment Grade Strategy seeks to produce excess returns above the Merrill Lynch Investment Grade Bonds (VSN1) Index. Portfolios employing this strategy contain ~70 convertible bonds and/or preferreds. Only candidates that have investment grade credit ratings are considered. Historically, this strategy has achieved higher returns than traditional fixed income strategies. Performance has minimal correlation to underlying capital markets.
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