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- High Premium or "Busted Converts" where the convertible price is far above the conversion value. Here the convertible acts more like a high yield bond, where the investor's primary concern is credit risk, and equity sensitivity is low.
- Low Premium or "Equity-like Converts, where the convertible price is very close to conversion value. This occurs when the stock price has risen sharply since issuance of the convertible. Here the convertible acts predominately like a common stock, and the investor's primary concern is equity price volatility.
- Mid-Market, balanced, or convex convertibles are convertible securities that we believe offer the greatest risk-reward trade off. Froley, Revy focuses on the most convex convertibles, or convertibles that enjoy the appreciation potential of the underlying common stock, while retaining the relative downside stability of a corporate bond. It is here that Froley Revy believes convertible securities offer “The Best of Both Worlds”.
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