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The current financial landscape is witnessing a resurgence in convertible bonds as corporations seek interest rate savings amidst rising rates. With interest rates for double B credit rated corporations escalating from 3-4% to 7-8%, many issuers are turning to the convertible bond market, benefiting from both interest rate savings and a connection to the equity market through embedded conversion features.
Additionally, a significant maturity wall of around $4 trillion in debt over the next four to five years is prompting issuers to explore the convertibles market for refinancing. Meanwhile, the active ETF space is experiencing substantial growth, with approximately 30% of ETF flows directed towards active ETFs, presenting a lucrative opportunity for asset managers. The 2019 SEC rule has facilitated the entry of asset managers into the ETF space, enabling them to build tax-efficient active managed strategies, leading to a shift towards rules-based strategies with an active edge in the active ETF market.
