Mark Friedman, Founder and CIO, DLD Asset Management

Alpha Exchange

For Mark Friedman, the Founder and CIO of DLD Asset Management, the convertible bond market has always made for interesting study. Sitting at the intersection of critical asset classes, the convertible bond market requires investors to assess risk from many dimensions at once. And with valuation components derived from equity, interest rate, credit and volatility risk, converts have provided Mark with plenty to analyze over nearly 3 decades in markets. Our conversation is a retrospective on the evolution of this hybrid product – from Mark’s early days trading Asian convertibles in the mid 90’s to the high vol, crowded era of the early 2000’s, all the way to today. Along the way in our discussion, we happen upon some of the important risk events in converts that Mark has traded through. He highlights some of the ancillary risks that an investor assumes in a converts, specifically, borrow, dividends and a vol dampening take-over, and how the market has sought to address these. We also spend some time assessing the changing buyer base in converts, from a market once dominated by arbitrage accounts to one in which long only capital has become a great proportion. Lastly, we discuss portfolio construction in a world of low rates, active Central Banks and risks that originate from sources not previously contemplated. In this context, Mark shares his thoughts on tail risk hedging, recognizing both its value and cost and preferring to keep it simple using listed options. I hope you enjoy this episode of the Alpha Exchange, my conversation with Mark Friedman.