A specificity of Edmond de Rothschild Asset Management, convertible bonds are managed by an equity team according to a bottom-up, stock picking approach, characteristic of the in-house investment philosophy. The managers focus on stock-specific factors concerning the underlying company rather than on measures of duration and volatility spreads, more representative of a bond approach.

In selecting convertible bonds, they benefit from the expertise and input of the entire European equity team, and are therefore in a position to consider a variety of large, small caps, and sector-specific companies which have been fully researched for equity portfolios. In reality, the convertible bond fund tends to mirror the strategy of the European equity funds : when the team has a strong conviction on a specific company which has issued convertibles, that same company will be introduced into the convertible fund.

Convertibles are selected for the portfolio according to the premium to strike, the valuation of the stock at the time of issue, the delta and yield to maturity and importantly, the fundamentals of the underlying company. Managers look for good profit growth, ROE, low debt, high free cash flow and attractive valuations. On the qualitative side, company visits and analysis from brokers enable them to select companies with experienced and reliable management, and a strong positioning on their sectors.