DNCA Invest Global Convertibles

September was marked by a renewed escalation of tensions in the Middle East, accompanied by soaring energy prices and a sharp rise in sovereign bond yields. The conflict intensified around the Strait of Hormuz, with new strikes exchanged between Washington and Tehran, before spreading to Bab el-Mandeb. While oil flows partially resumed toward the end of the period, exports of refined products remained severely disrupted. This energy shock reignited inflation fears without, at this stage, calling into question the resilience of economic activity. Central banks thus maintained a restrictive stance: the ECB raised its deposit rate by 25 basis points to 2.50%, the Fed raised the Fed Funds rate target range to 3.75%–4.00%, while the BoJ raised its policy rate by 25 basis points to 1.25%, a high not seen since 1995. The U.S. 10-year yield thus reached 5.28%, its highest level since 2007. In Europe, the widening of the OAT-Bund spread beyond 120 basis points—compared with about 80 basis points at the end of August—illustrated the rise in the risk premium demanded on French debt. In the foreign exchange market, the yen appreciated, supported by the convergence of two trends: continued monetary tightening in Japan, which is gradually improving the relative attractiveness of yen-denominated assets, and rising U.S. interest rates accompanied by renewed risk aversion. Finally, the artificial intelligence theme remained a key driver, but with increased selectivity: investors now prioritize visibility on monetization, the availability of electrical power, and disciplined infrastructure financing.

Against this backdrop, the primary market recorded nearly $26 billion in issuances. The portfolio was particularly active in the following investments: Coreweave 2033, Voyager Technologies 2032, Snowflake 2029/2031, BW LPG 2031, Accor 2032, Deutsche Boerse 2031, Soitec 2033, Harmony Gold 2031, Asustek 2031, Delta Thai 2031, Zhen Ding 2031, Nichicon 2031, Shimizu 2031. These trades were financed by profit-taking on ENI, Dynatrace, Halozyme, SMFG, Mitac, Nippon Steel, AT&S, BNP, and Iren.

Over the month, the fund posted a return of -1.81% compared to -2.24% for its benchmark, the FTSE Global Focus Hedged CB (EUR). In terms of valuation, international convertible bonds declined slightly over the month. In an environment of persistently high interest rates and more volatile equity markets, convertible bonds retain a strategic role: they allow investors to maintain exposure to the potential of equities while benefiting from the cushion provided by bonds. Their convexity is thus a particularly valuable asset for navigating the periods of uncertainty in the fourth quarter.