Market Overview - The convertible bond market has expanded significantly, with institutional investors accounting for over 90% of the market[3] - As of May 14, 2025, the market balance has decreased to 686.4 billion CNY, with 492 convertible bonds available[24] Investment Strategy - The report maintains a neutral to optimistic view on convertible bond investments, influenced by declining interest rates and a favorable equity market valuation[12] - The low-price strategy faces challenges due to credit risk, with a maximum drawdown of 14% in 2024, necessitating the development of "patching" and "replacement" strategies[4] Strategy Performance - The "patching" strategy has achieved an annualized return of 17.35% since 2018, doubling the traditional low-price strategy's performance, with a Sharpe ratio of 1.2 and a capacity exceeding 2.5 billion CNY[4] - The "replacement" strategy, focusing on options and low-volatility bonds, has delivered an annualized return of 14% since 2017, with a maximum drawdown of less than 10% and a Sharpe ratio of 1.5[4] Dual-Low Strategy - The dual-low strategy has seen a decline in excess returns due to an increase in the conversion premium rate, which has risen to 70% since 2022[5] - The five-factor enhancement strategy for the dual-low approach has yielded an annualized return of 24% since 2018, with a maximum drawdown of less than 9%[5] Industry Rotation - The four-factor industry rotation strategy has achieved an annualized return of 26% since 2018, with a maximum drawdown of less than 11% and a Sharpe ratio above 2[6] Risk Considerations - The effectiveness of the convertible bond strategies is subject to historical data reliance, and the potential for model failure exists[7] - Risks include the possibility of stock delisting and changes in policy affecting convertible bonds[7]