China Zhongji Investment enriches its securities investment portfolio with convertible bond strategies
Convertible bonds, with their asset attributes of "debt base + stock options," naturally possess the characteristics of being "both offensive and defensive," aligning with the company's risk preference and portfolio management needs.
Based on this, China Zhongji Investment incorporated convertible bonds into the securities team's investment portfolio starting March 2021. This complements high-yield bonds, stocks, and over-the-counter options, effectively enhancing the portfolio. Over six months, the convertible bond portfolio achieved an absolute return exceeding 30%.
The strategies and risk control measures for the convertible bond portfolio include:
(1) Absolute Low-Price Strategy: Convertible bonds with absolutely low prices and relatively low conversion premiums can better highlight defensive characteristics. Combined with seizing opportunities in the underlying stocks, this strategy employs a "hold-and-wait-for-increase" approach.
(2) Rotation Mapping Strategy: The underlying stocks of convertible bonds are often small and medium-sized capitalization companies, presenting numerous thematic investment opportunities. Mapping the stock market's sector rotation strategy to convertible bond allocation helps capture sector rotation opportunities. Due to the protection of the debt base, the sector rotation strategy for convertible bonds is less risky than for stocks, is more conducive to traders' mindset management, and facilitates better execution of stop-profit and stop-loss disciplines.
(3) Position Control: Based on the differing risk preferences and liquidity needs of various accounts, we employ both a diversified allocation strategy of "spreading low-price investments" and, under the condition of thorough research, a relatively concentrated allocation strategy.
Furthermore, convertible bonds offer better liquidity than high-yield bonds in the company's securities portfolio. This allows for moderate leverage operations and the use of convertible bonds as collateral for over-the-counter options trading, thereby further optimizing portfolio management efficiency.
Looking ahead to 2022, convertible bonds still possess considerable investment value: On the one hand, with the trend toward net asset value accounting for fixed-income products, the allocation of convertible bonds will continue to increase, thereby enhancing portfolio returns. On the other hand, in 2022, the pressure to stabilize and grow the macroeconomic environment will increase, and monetary policy will remain loose. A low-interest-rate environment will be favorable both to the consolidation and raising of the value of the debt base, and to the continuation of the growth-style in the stock market, thereby benefiting the option value of the corresponding convertible bonds.
China Zhongji Investment will continue to improve its secondary market securities investment portfolio, striving to establish unique competitive advantages in high-yield bonds, convertible bonds, and over-the-counter options.
