U.S., Europe Diverge on Convertibles Strategy

U.S. and European institutions investing in the convertible securities market invest similar amounts on average, but utilize different portfolio strategies, according to a report by Greenwich Associates. The report also noted that, in the case of hedge funds at least, the two regions use different leverage ratios. ‘In terms of market participants, it is noteworthy that hedge-fund investors, who tend to be more active traders and buyers, have become a larger part of the mix,’ explained Greenwich Associates consultant, John Feng. Sixty seven per cent of U.S. and 70 per cent of European convertible investors interviewed identified hedging as their predominant convertible investment strategy. Fourteen per cent of U.S. and 4 per cent of European convertible investors invest via outright equity-oriented strategies, compared with 14 per cent of U.S. and 24 per cent of European institutions who reported that they invest via outright dedicated convertible funds. Few said they employ a fixed-income strategy in their convertibles trading. U.S. investors reported an average of $1.2 billion in convertible assets under management, compared to $1.3 billion on average reported by investors in Europe. In both cases, that is down modestly from 2002.


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