In this paper, we will discuss:

• Global convertible bonds have been in the eye of the storm during the recent correction. The asset class has failed to provide investors with the downside protection they were expecting.
• We believe that this phase of underperformance has presented a valuation opportunity. Convertible bonds have cheapened to levels that historically corresponded to buy signals.
• In previous bear markets, convertibles showed similar behaviour: they corrected in line with equities in a first phase before generating solid outperformance afterwards. We expect the current bear market to be no exception.
• The challenge for investors is to time the end of the current correction in risk assets. We see investing in convertibles as a way to position for a bounce without timing it. Convertible bonds tend to perform well in the early stages of a recovery. However, if volatility were to persist for a longer period, convertible bonds are a lower-volatility asset class with good credit quality, which should help to preserve capital.