Rational Funds has launched the Rational/Pier 88 Convertible Securities Fund (PBXIX), a converted hedge fund, which employs the same management team and investment strategy as its predecessor.
Rational Funds has launched the Rational/Pier 88 Convertible Securities Fund (PBXIX), a converted hedge fund, which employs the same management team and investment strategy as its predecessor.This is Rational Funds’ fourth hedge fund conversion and its first fund that focuses on convertible securities. These “hybrid” securities possess both fixed income and equity characteristics, with investment opportunities in bonds, preferred stocks or other securities that may be converted into a prescribed amount of common stock at a pre-stated price. PBXIX’s objective is to seek total return consisting of capital appreciation and income.
The management team at Pier 88, which serves as the sub-adviser to the fund, has over two decades of relevant investment experience and has invested in convertible securities for over 10 years, with a strong track record of managing such a strategy in both rising rate and equity downturn environments. As an asset class, convertible securities may trade at a discount to its pari-passu fixed income counterparts, and thus the asset class is often overlooked. To combat this reality, PBXIX’s management team employs an equity analysis perspective for investment decisions, establishing a view on the intrinsic value of a business and then examining the overall capital structure of that asset to identify potential mis-pricing. The team structures the Fund’s portfolio based on their macroeconomic views and will seek to take advantage of perceived secular and cyclical themes across all industry sectors.
“As we expand our portfolio of fund offerings, Rational Funds is interested in identifying unique strategies with solid track records,” says Jerry Szilagyi, CEO of Rational Funds. “The Rational/Pier 88 Convertible Securities Fund offers investors access to a sophisticated, convertible securities-based strategy that provides participation in the upside of equity markets with the limited downside of bonds. We’re happy to have the Pier 88 team and this proven strategy as part of our portfolio offerings.”
This investment approach focuses on a blend of credit-sensitive, equity-sensitive and balanced convertible securities and does not pursue a distressed securities approach. Over half of the portfolio’s allocation is to convertible bonds, with the remaining majority in convertible preferred stock.
