Lazard Asset Management has launched a new registered managed investment scheme, offering Australian investors access to a US$500 billion asset class.
The Lazard Global Convertibles Fund offers exposure to a global portfolio of convertible bonds, with a maximum 10% equity position reflecting bond conversions.
Lazard said the fund typically holds between 60 and 80 securities, selected from a universe of 900-1000 convertible bonds.
The fund seeks to achieve total returns in excess of the Thomson Reuters Global Focus Hedged (AUD) Convertible Bond Index (net interest reinvested) over rolling five-year periods.
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The fund will be managed by Arnaud Brillois and an investment team based in New York and Paris.
Lazard said the fund employs a fundamental, bottom-up approach that uses rigorous qualitative and quantitative analysis to drive security selection, complemented by a top-down process that "guides tactical positioning".
"Investors have been faced with minimal fixed income returns, late-stage equity valuations, and the prospect of growing market volatility this year," Brillois said.
"At the same time, convertible bond issuances have reached their highest levels since 2007, reaching US$101.8 billion for the year to date."
Brillois added that the dual nature of convertible bonds gives them an advantage over conventional investments.
He said they tend to exhibit bond-like characteristics in declining equity markets, and equity-like characteristics in rising equity markets.
Lazard said convertible bonds are a traditionally lesser-known asset class, but are similar to corporate bonds, as they're issues with a call option giving the holder a right to convert the bond into equity shares.
"Convertible bonds have started to earn dedicated allocations in institutional portfolios and, as such, we believe these securities are beginning to be viewed as a distinct asset class," Brillois said.
"We expect inflows into the asset class to continue as convertible bonds become especially relevant in volatile markets, and we are pleased to offer a solution for Australian investors seeking access to this asset class."