Alma Advent Global Convertible Fund

Market Review and Outlook

Global equity markets advanced during the month of May, with the MSCI ACWI (USD Hedged) returning +3.76% and continuing to push record highs. In the U.S., performance was influenced significantly by a few mega-cap behemoths such as Nvidia and Apple, as the market cap weighted S&P 500 outperformed the S&P 500 Equal Weight Index by 2.14%. Increasing consumer confidence, resilient corporate earnings, and inflation readings coming in lower-than-expected helped to bolster U.S. markets. However, expectations for both the magnitude and likelihood of U.S. Federal Reserve rate cuts continue to push out, with just a single rate cut priced in for much later in 2024. European markets advanced with the STOXX Europe 600 index up +3.54% helped by a combination of improving economic growth, lower inflation, and anticipation of a rate cut from the European Central Bank (which was subsequently delivered in June). Emerging markets, supported by an improving economic outlook in China, advanced with the MSCI Emerging Markets Index returning +2.23% (USD Hedged) during the month. Global bond markets rose, as the ICE BofA Global Broad Market Index (GBMI) returned +0.93% (USD Hedged) and the ICE BofA Global High Yield Index (HW00) returned +1.26% (USD Hedged). Global convertibles, represented by the Refinitiv Global Focus Index (USD Hedged, “RGF”), returned +1.37% in May.

The fund exceeded the benchmark return during the month due to positive security selection in several sectors. In Industrials, the fund experienced strong gains from companies associated with renewable energy. In Energy, the fund benefited from strong performance from some European energy services providers. The fund’s underweight to Utilities offset some of this positive relative performance as lower interest rates led the group to advance. The fund had strong selection and excess contribution within all regions except Japan.

There was $18.3 billion of convertible issuance in May, bringing year-to-date global issuance to $49.3 billion, which is a 26% increase versus issuance in the first 5 months of 2023. New issues continue to be attractively priced with higher coupons than in recent years, and issuers are citing a broad range of purposes for raising the capital.

Fund

During the month, we initiated new positions in several attractively priced new issues across the globe in the Consumer Discretionary, Technology, and Industrial sectors. It was notable to see some large issuances from Chinese e-commerce leaders returning to the convertible market to fund share buyback programs. We exited certain positions in the Energy and Healthcare sectors, where we felt equity upside was limited, and sold some existing holdings where changes in the equity led the convertible to have muted total return potential. From a regional perspective, the most meaningful change in allocation is a higher weighting in China, due to the new issuances, partially sourced from a lower weighting in Japan.