Convertibles

A properly managed portfolio of convertible securities offers your insurance company several important benefits:

  • The ability to capture the majority of the stock market’s upside with a risk profile, or volatility of returns, similar to bonds
  • Preservation of capital due to the downside protection inherent in fixed income instruments
  • Improved risk-based capital and BCAR versus equity securities
  • Enhanced portfolio diversification

The goal of our convertible strategy at AAM is to enhance long-term portfolio returns. To achieve these results, we rely on a proprietary valuation model/methodology that identifies undervalued convertible securities exhibiting favorable risk/return characteristics. Our investment management team’s considerable experience with convertible securities provides an opportunity to significantly increase the return potential of your portfolio with historically less risk than equities.

Because convertible securities trade a portion of their yield for appreciation potential, they are more appropriate for insurance portfolios that can forego the incremental yield associated with more traditional fixed income securities.

Recognizing the specialized nature of the convertible asset class, AAM has maintained a subadvised relationship with Zazove Associates, LLC since 1991. Zazove’s risk-controlled, quantitative approach to managing convertible portfolios is often well-suited to the risk tolerances of insurance company investors.