Choosing convertible bond flavours

The most widely used convertible bond indices for tracking the asset class are the ‘FTSE Global Vanilla Convertible Index’ (Vanilla) and the ‘FTSE Global Focus Convertible Index’ (Focus). Despite them both benchmarking convertible bonds, their performance profiles can make them appear almost like different asset classes, with the Vanilla index having outperformed Focus over the past 20 years. The indices have a range of differences, including the Focus’ monthly rebalancing process that omits convertibles that are too high or low in price. Consequently, the Vanilla index tends to show higher...