RWC Partners aims to take advantage of pricing anomalies in the convertible bond asset class by launching a convertible bond fund in January 2009.  The fund will sit alongside the existing RWC Global Convertibles Fund, looking to achieve significant returns from the normalisation of distressed valuations currently available in the convertible bond market.

Convertible bond prices have fallen significantly in recent months in line with declines in equity and credit markets.  Forced selling, predominantly by convertible arbitrage hedge funds, has placed additional downward pressure on prices. As a result of these factors, convertible bonds have fallen dramatically and now offer what the firm sees as “compelling” value relative to equities and equivalent straight bonds.

The fund will be long only and invest in listed convertible bonds, holding these higher-yielding securities until the asset class normalises.  The portfolio will be diversified across securities, sectors and geographies to mitigate credit risk. It will have no exposure to so-called synthetic convertible bonds and will not use convertible arbitrage. The minimum investment term of the fund is two years.

Miles Geldard will be lead portfolio manager, supported by Lee Manzi and Grant Webster. The team have managed the RWC Global Convertibles fund since its launch in early 2007.