In the third quarter of 2025, the global convertible market demonstrated exceptional strength, surpassing the performance of the broader global equity market. This impressive showing, as measured by the FTSE Global Convertibles Index, reflects a vibrant landscape driven by a surge in new issuances. Companies actively sought to refinance existing debt and secure capital for expansion, particularly in high-growth sectors like artificial intelligence infrastructure. The strategy’s portfolio delivered a gross return of 9.05%, closely aligning with the FTSE Global Convertible Index’s 9.13% for the same period. This continued positive momentum for the year underscores the resilience and attractiveness of convertible securities, especially those offering balanced risk-reward profiles.
The third quarter of 2025 witnessed a remarkable acceleration in global convertible issuance, a trend fueled by companies strategically seeking to optimize their capital structures. This period was characterized by a significant influx of new convertible bonds, as businesses aimed to refinance existing liabilities and secure fresh capital to fund their growth ambitions. A notable driver behind this surge was the burgeoning excitement surrounding artificial intelligence (AI) infrastructure. Companies operating within this innovative sector found a receptive market for their convertible offerings, capitalizing on investor enthusiasm for advanced technological developments.
Amidst this dynamic market environment, the strategy meticulously selected convertible instruments, focusing on those that exhibited both attractive risk-reward characteristics and were issued by enterprises with robust fundamental strengths. The ability to identify and engage with new issuances proved particularly beneficial, as these often provided optimal entry points and terms. The strategic emphasis on total-return convertibles, which combine the income potential of bonds with the capital appreciation potential of equities, remained central to the portfolio's approach. This focus allowed the strategy to capture gains from both rising equity valuations and stable income streams, even as market conditions evolved.
The portfolio's performance for the quarter, yielding a gross return of 9.05%, stood in close proximity to the FTSE Global Convertible Index's return of 9.13%. This strong alignment underscores the effectiveness of the strategy's investment philosophy and its capacity to keep pace with, and occasionally exceed, broader market trends within the convertible space. This consistent performance reinforces the conviction that a disciplined approach to selecting fundamentally sound companies, coupled with a keen eye for advantageous new issuance opportunities, continues to be a cornerstone of success.
The current market landscape presents numerous opportunities for instruments that align with the strategy's preference for an appealing balance of risk and potential reward, particularly within the segment of newly issued securities. The strategy remains committed to its core investment philosophy, which prioritizes total-return convertibles originating from companies with strong financial foundations. This ongoing dedication is expected to contribute to the strategy's sustained success and provide a durable advantage in navigating future market conditions.