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JPMorgan launches convertibles income fund
20 May 2013
JPMorgan Asset Management predicts growth in demand for convertible securities
JPMorgan Asset Management has launched a global convertibles income investment company.
The investment company will give investors access to a globally diversified portfolio of convertible securities from a broad range of sectors, offering income as well as the potential for long-term capital growth.
In a statement, JPMorgan said: “Convertible securities offer investors the potential to participate in rising equity markets while providing bond-like defensive characteristics in falling equity markets.”
The asset manager also predicted that convertibles could have strong performance this year because their sensitivity to equities should benefit from the rallies in equity markets, while bond protection should safeguard against setbacks.
The offer for subscription, which opened on Friday May 17, will close on June 5 2013. It is expected that the shares will begin trading on June 11 2013.
The company will be managed by the firm’s convertible bond team and will be led by Antony Vallee, head of convertibles. The company will target an initial gross dividend yield to shareholders of 4.5% in the first financial year. Dividends will be paid half-yearly in the first year, with the intention of moving to quarterly dividend payments thereafter.
Vallee said that UK investors are becoming more familiar with convertibles, adding: “If you compare convertibles with bonds, it’s often hard to get excited about the yields on offer on investment-grade government and many corporate bonds.
"Additionally, with bank finance increasingly hard to come by, there has been a general change in the landscape, and companies – particularly smaller ones and those not rated by the credit ratings agencies – are keener to raise money on the capital markets.”