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convertible bonds, which can be used for both offense and defense, are attracting more and more top private equity firms to invest in them. according to an interview with a reporter from shanghai securities news, since july, many top quantitative and bond strategy private equity firms have bought the bottom of convertible bonds, and some managers have even launched new products for convertible bond investment.

◎reporter ma jiayue

convertible bonds, which can be used for both offense and defense, are attracting more and more top private equity firms to invest in them. according to an interview with a reporter from shanghai securities news, since july, many top quantitative and bond strategy private equity firms have bought the bottom of convertible bonds, and some managers have even launched new products to invest in convertible bonds. in the eyes of industry insiders, convertible bonds are assets that have both stock and bond characteristics. as the market continues to expand, various institutions will increase their investment efforts. in addition, the valuation of convertible bonds is at the bottom, and many opportunities for mispricing are worth paying attention to.

top private equity firms flock to the convertible bond market

since july, the convertible bond market has been volatile and adjusted, but many leading private equity firms have been buying more as the market falls.

"the decline provides a better opportunity to increase positions." a partner of a private equity firm in beijing with assets of tens of billions of yuan admitted that although the convertible bond market has been volatile since july, the company has actively seized the opportunity to buy at the bottom, and some targets that were mistakenly sold off have shown a very high cost-effectiveness.

a person from a leading quantitative private equity firm in beijing revealed: "in august, when convertible bonds were falling sharply, the company increased its holdings of some convertible bonds."

zhuge hengzhong, fund manager of zhurun ​​investment, also said that the company is strongly optimistic about the convertible bond market this year.

in fact, institutions' preference for convertible bonds was already evident in the second quarter.

according to statistics from private equity ranking network, as of the end of june, products under 12 private equity firms with assets of over 10 billion yuan appeared on the list of the top ten holders of 93 convertible bonds, holding a total of 34.0368 million convertible bonds with a total market value of 3.459 billion yuan.

specifically, private equity funds with tens of billions of dollars in assets under management that use subjective and quantitative strategies have all invested in convertible bonds.

according to data from private equity ranking network, as of the end of june, products under four billion-level quantitative private equity firms held a total of 282,400 convertible bonds, with a total market value of 35 million yuan; products under six billion-level subjective strategy private equity firms appeared in the top ten holders of 77 convertible bonds, with a total market value of 3.334 billion yuan. another two private equity firms that combined subjective and quantitative strategies held a total of 850,800 convertible bonds, with a total market value of 90 million yuan.

convertible bonds can be used for both offense and defense

"private equity funds with tens of billions of dollars in assets have been investing in convertible bonds, mainly because convertible bonds have two advantages." a private equity researcher in shanghai said that on the one hand, convertible bonds have both debt and stock characteristics. against the backdrop of greater uncertainty in the macro environment, convertible bonds have become an investment tool that institutions can use for both offense and defense. on the other hand, the convertible bond market implements a t+0 trading system, which is flexible and convenient in operation. in particular, the convertible bond market has expanded significantly in recent years, and there is a large room for price fluctuations. quantitative private equity funds have paid attention to this opportunity.

zhuge hengzhong analyzed that from the perspective of stocks, after the previous adjustments, the probability of the stock market achieving mean reversion is increasing; from the perspective of bonds, about two-thirds of the convertible bonds on the market currently have a positive yield to maturity. even if they cannot be converted into shares, the bonds can still create positive returns for the portfolio after the principal is repaid at maturity. in addition, key indicators such as the percentile of the conversion premium rate and the yield to maturity all show that convertible bonds are currently at the bottom range, and many high-quality targets are significantly undervalued. it is expected that valuations will be repaired in the future as market sentiment improves.

strengthening credit risk assessment has become a consensus

regarding the specific "strategy" for subsequent convertible bond investments, many leading private equity firms have mentioned the need to carefully identify credit risks.

feng xiang, director of research at tongwei investment, also believes that the research and selection of convertible bonds should focus on the company's quality, focusing on the company's fundamentals, premium rate, and maturity redemption date. at the same time, after the release of the new "nine national regulations", the historical record of "zero default" of convertible bonds was broken, and further attention must be paid to corporate credit risks, and those targets with real investment value will be found in the future.

he jinlong, general manager of youmeili investment, emphasized the diversification of investment. he admitted that credit risk is an important reason for the recent sharp fluctuations in the convertible bond market. when selecting targets, we should not only pay attention to indicators such as the price, volatility, and premium rate of convertible bonds, but also consider diversification to reduce the risk of large fluctuations in the overall portfolio caused by individual bond disturbances.