In this analysis, Citywire Selector focuses on the two global convertible bond managers topping the sector on a five-year total return basis.
We take a closer look at their current investment thinking to see how they have forged ahead amid rising investor interest and the ability to invest across.
*Data covers the period November 2012-November 2017.
2. James Peattie, CQS
Portfolio manager, CQS Global Convertible
Performance: Five-year total return of 54.52%, with a Manager Ratio of 0.74.
Experience: Peattie first joined CQS in 2003 and started running the group’s Convertible Opportunities fund in 2009 before moving over to the Global Convertible fund in May 2015. Prior to that, he was the global head of convertibles at DrKW and has also served as head of international convertible research at Merrill Lynch.
Citywire Rating: Peattie has been running funds since 2009 and, despite gaining his first rating of + in July 2015 for a month, he is not currently eligible for one. The manager also earned a + rating for a two-month stint in February and March 2016.
Investment Style: The Ucits-compliant long-only convertible fund is largely invested in the EMEA region, which represents 47% of the portfolio. In terms of sectors, consumer discretionary makes up 13.4% of the total exposure, with information technology at 13.2%.
This is while 7.9% is held in cash. The largest single position in the portfolio is German services company E.On at 3.06% followed by French energy firm Technip at 3%.
Overall, around 40% of the fund’s assets are invested in convertible bonds with a one to three-year maturity, while a quarter is in three to five-year maturity. In terms of ratings, nearly half of all holdings do not have a rating and around 37% are BBB.
1. Arnaud Brillois, Lazard Fréres Gestion
Portfolio manager, Lazard Convertible Global
Performance: Five-year total return of 54.67%, with a Manager Ratio of 0.75.
Experience: Brillois joined Lazard Frères Gestion in 2008 and is now head of convertible fund management and co-head of structured products and alternative investment. Prior to that, he was head of the alpha fixed income team at Natixis Asset Management, where he spent five years.
Citywire Rating: Brillois first entered the ratings with a + rating in October 2016, which he held for four months before earning an A rating. In May 2017 he improved on this and gained an AA rating.
Investment Style: Brillois’ $1.21 billion (€1.03 billion) Lazard Convertible Global fund has gained an advantage from its shorter duration compared with the benchmark. His fund has a modified duration of 0.77 years versus the index’s 2.19 years.
The fund’s top holdings include The Pric, which accounts for 2.1% of the portfolio and TTWO (2.0%). The fund has benefited from its overweight in the technology sector, where the manager has allocated more than 35% of the portfolio.
The second largest sector weighting is consumer services at 12%. In terms of geographical allocation, nearly half the fund is invested in the US and just under 40% in Europe. Ratings-wise, the majority of holdings are not rated while around 10% have a rating of BBB and another 10% are BB-.
This article originally appeared in the December-January edition of Citywire Selector magazine.