As an enhancement to a fixed-income allocation, convertibles growth potential can be a plus. We also expect the equity markets to remain volatile. The conservative investor can take advantage of the upside potential available through such companies and yet help lower the risk and volatility by using convertible securities to invest in such companies. Many investors are starting to understand the importance of asset allocation in their investment process. An appropriate asset allocation strategy actually actually helps reduce risk while not adversely affecting returns, since individual market sectors will tend to outperform others at any given point in time.
Many market analysts classify convertible securities as a separate asset class.
That means that adding convertibles do not track directly with either the stock or bond markets, helping guard against unforeseen economic events. Other investors consider convertible securities to be a fixed-income style that can add diversification. We feel that the convertible style can add value to the fixed-income portion of many portfolios.