GLG Convertible Arbitrage

The GLG Convertible Arbitrage Strategy (the ‘Strategy’) is an actively managed, benchmark unconstrained, convertible bond arbitrage strategy, seeking returns throughout all market cycles while primarily focused on North America and Europe.
  • Managed by a seasoned portfolio manager who has over 17 years of experience in convertible arbitrage investing across both North America and Europe
  • The Strategy employs a rigorous investment process and is focused on high growth sectors – primarily technology, healthcare and consumer - employing approximately 80-120 individual positions including select contrarian shorts
  • We believe the investment philosophy is differentiated from others through the use of disciplined scaling, a balanced/higher delta focus and macro overlay hedges

Approach

The Strategy employs a rigorous investment process developed through 17 years of convertible bond trading and the portfolio is tailored to evolving markets. Positions are screened initially on a sector basis, and within sectors, all bonds are assigned a fair value and resultant rich/cheap % to fair value through convertible bond modelling. Promising securities undergo extensive due diligence, bond indenture inspection, credit and volatility assumption validation, and potential event profit and loss forecasting. Finally, position sizes are determined based on convertible premium exposure, credit spread, and absolute implied volatility levels. Positions are typically held for 3 – 18 months.

We believe the resulting portfolio is well diversified and typically consists of 80-120 individual positions which pair into 40-60 arbitrage positions (defined as long a convertible bond and short the underlying stock or in the case of a short, vice versa) in technology, healthcare, consumer discretionary and other sectors.

The Strategy aims to differentiate itself from competitors through outperformance in market disruptions, low exposure and performance attribution to credit (typically less than 1% risk capital exposure to cs10% since inception), efficient and disciplined long leverage scaling (2x-3.5x), and selected contrarian short ideas1.

Approach Alternative
Asset Class Fixed Income
Geographic Focus North America and Europe

1. These risk guidelines and/or limits are provided for information purposes only and represent current internal risk guidelines. There is no requirement that the Strategy observes these limits, or that any action be taken if a guideline limit is reached or exceeded. Internal guidelines may be amended at any time without notice

Manager(s)

Gil Song
Gil Song
Portfolio Manager, Man GLG

Investment Solutions

Man offers a comprehensive suite of investment solutions and formats that can be tailored and optimised to meet specific client needs. Our investment solutions offer optionality including: liquidity, control, investment restrictions, investor customisations and transparency.

UCITS
Alternative investment funds
US 40 ACT
Regional funds
Separate accounts
Advisory mandates
Managed accounts

Access to investment products and mandate solutions are subject applicable laws and regulations including selling restrictions and licensing requirements. Investment solutions listed above may not be compatible for all investment strategies and may be subject to minimum subscription requirements. Regional Funds: In additions to UCITS and AIFs registered across the EEA, a number of investment strategies are available in vehicles registered in Chile, Netherlands, Hong Kong, Japan, Singapore, South Korea and Switzerland.

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Considerations

Investment Objective Risk - There is no guarantee that the Strategy will achieve its investment objective.

Market Risk - The Strategy is subject to normal market fluctuations and the risks associated with investing in international securities markets and therefore the value of your investment and the income from it may rise as well as fall and you may not get back the amount originally invested.

Counterparty Risk - The Strategy will be exposed to credit risk on counterparties with which it trades in relation to on-exchange traded instruments such as futures and options and where applicable, ‘over-the- counter’("OTC","non-exchange") transactions. OTC instruments may also be less liquid and are not afforded the same protections that may apply to participants trading instruments on an organised exchange.

Currency Risk - The value of investments designated in another currency may rise and fall due to exchange rate fluctuations. Adverse movements in currency exchange rates may result in a decrease in return and a loss of capital. It may not be possible or practicable to successfully hedge against the currency risk exposure in all circumstances.

Liquidity Risk - The Strategy may make investments or hold trading positions in markets that are volatile and which may become illiquid. Timely and cost efficient sale of trading positions can be impaired by decreased trading volume and/or increased price volatility..

Financial Derivatives - The Strategy will invest financial derivative instruments ("FDI") (instruments whose prices are dependent on one or more underlying asset) to achieve its investment objective. The use of FDI involves additional risks such as high sensitivity to price movements of the asset on which it is based. The extensive use of FDI may significantly multiply the gains or losses.

Leverage - The Strategy's use of FDI may result in increased leverage which may lead to significant losses.

Non-Investment Grade Securities - The Strategy may invest a significant proportion of its assets in non-investment grade securities (such as “high yield” securities) are considered higher risk investments that may cause income and principal losses for the Strategy. They are instruments which credit agencies have given a rating which indicates a higher risk of default. The market values for high yield bonds and other instruments tend to be volatile and they are less liquid than investment grade securities.

Single Region/Country Risk - The Strategy is a specialist country-specific Strategy or focuses on a particular geographic region, the investment carries greater risk than a more internationally diversified portfolio.

Model and Data Risk - The Investment Manager relies on quantitative trading models and data supplied by third parties. If models or data prove to be incorrect or incomplete, the Strategy may be exposed to potential losses. Models can be affected by unforeseen market disruptions and/or government or regulatory intervention, leading to potential losses.