Convertible bonds: the asset class of 2009?

Many people who would normally invest in shares are putting their money into convertible bonds. Tim Bennett explains what they are, and whether now is the time to get into them.

Lurking between shares and conventional bonds is a "hybrid" beast that Hugo Greenhalgh in the FT says could be "the asset class of 2009": the convertible bond. "Across the spectrum we're seeing crossover buyers who would have traditionally invested in straight equities or straight debt seeing true value in convertibles," notes Dan Mannex at RWC Partners. Even Warren Buffett's recent $5bn investment in Goldman Sachs took the form of a "synthetic convertible" when he bought 10% preference shares and warrants issued by the bank. So what exactly are they, and is now the time to get in?

The strange world of the convertible bond

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.