The complex nature of convertible securities—part debt and part equity—can lead mainstream stock and bond investors to ignore them, creating an inefficient market and prices which offer return without comparable risk.

We place primary emphasis on identifying the greatest bargains—the securities most likely to capture a high percentage of any appreciation of the underlying stocks while being exposed to a much lower percentage of any declines that may occur. The record since 1987 shows that convertible securities portfolios managed by Oaktree's principals have delivered most of the return of common stocks with reduced volatility and risk.

"Our primary focus is on convertibles which have a clear imbalance of upside potential to downside risk, with this superior imbalance being a function of their credit profile and the convertible structure and pricing," says portfolio manager Larry Keele. "We then look at the potential for capital gains from an underlying equity story."

We aim for broad diversification to protect against the impact of poor performance by a particular issuer or industry. To further minimize risk, we emphasize convertible securities with loss-preventive features such as short maturities or the right to "put" a security back to the issuer within a few years.

Click here for information regarding risk disclosures associated with the strategy.