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NextFin News - Royal Bank of Canada has hired equity capital markets banker Mariano Gaut from Mizuho Financial Group to run the structuring of corporate derivatives and convertible bond origination worldwide, a move that lands as equity-linked financing races toward a record year fueled by artificial-intelligence capital spending. Gaut will join RBC in January as New York-based global head of strategic equity solutions within the bank's ECM team, according to an internal memo and a representative for the Canadian lender.
The hire is a vote on a market that has stopped being a niche. Global equity-linked issuance reached about $200 billion in the first nine months of 2026, up 62 percent from a year earlier, while the United States alone accounted for more than $131 billion through early September - already past 2025's full-year record. RBC's own equity-linked desk describes the market as on pace for a record year, with data centers, power companies and hyperscalers diversifying their funding tools as convertible indices materially outpace equity returns on elevated volatility.
The question the deal raises is whether this is a cyclical funding fad or a durable reshaping of how large companies finance growth. The answer matters because Gaut's mandate - corporate derivatives plus convertibles - sits exactly where those two forces meet.
The Hire and the Mandate
Gaut arrives with more than two decades of experience originating, structuring and executing equity, convertible and derivative financings, and advising on strategic and structured equity and share repurchase solutions for U.S. and global clients. At Mizuho, where he has been a managing director in capital markets since January 2016 after a long stint at Citigroup, he was responsible as a lead banker for raising more than $30 billion in equity and convertible capital in the healthcare sector across managed care, pharmaceuticals, healthcare services and related industries. His career began on a sales and trading desk in structured products, which is the kind of derivatives-first background that fits a structuring mandate better than a pure origination resume would.
His new title at RBC - global head of strategic equity solutions - is not a conventional ECM coverage role. It combines two product sets that historically lived in different silos: the engineering of corporate derivatives, such as collars, prepaid forwards and exchangeable structures for concentrated holders, and the origination of convertible bonds. The combination is deliberate. A convertible is, at its core, a bond plus an embedded equity option; pricing, hedging and distributing it requires the same derivatives plumbing that strategic equity teams build for large shareholders managing single-stock risk. When a company issues a convertible, the underwriter typically hedges the embedded delta by buying or selling the underlying stock, and often layers on call spreads or capped calls to manage that exposure - the same toolkit used to help a founder monetize a concentrated position without crashing the share price.
For RBC, the hire is also a statement about where it wants to compete. The bank sits outside the traditional bulge-bracket elite in overall investment-banking fee share, but it has built a credible equity-linked franchise through execution rather than balance-sheet dominance. RBC reports more than 200 joint bookrun convertibles and over 132 call spread overlays and capped calls executed in North America since 2020, alongside 145-plus joint bookrun IPOs and $2.7 trillion of capital raised across follow-on offerings in the same period. The structured equity solutions group is led by Joe Stoots, who describes the desk's mandate as pairing structuring expertise with balance-sheet strength to engineer solutions for corporate, institutional and high-net-worth clients.
"The Equity-Linked Market is on pace for a record year in 2026 in terms of issuance volumes. Cap Ex spend around AI is driving much of the volumes with data centers, power companies, hyperscalers etc all accessing the market to diversify their funding tools. Valuations in the convertible market are incredibly robust with convertible indices materially outpacing equity market returns, driven (in large part) by elevated volatility. Investor appetite for the product remains very strong."
That assessment comes from Richard Duffield, managing director of U.S. equity-linked origination at RBC Capital Markets, and it frames why the bank is investing in the role now. The timing is not accidental: banks add senior product heads when they expect a product line to carry weight across multiple rate and volatility cycles, not when they are simply riding a quarterly spike.
Why Convertibles Are Having a Record Year
The 2026 convertible market is being powered by a specific and unusually large borrower: the AI infrastructure complex. JPMorgan estimates hyperscaler capital expenditure will reach $697 billion in 2026, and that spending is flowing through the capital stack in creative ways. CoreWeave's April 2026 raise combined $1.75 billion of senior unsecured notes with $3.5 billion of convertible senior notes, one of the largest combined high-yield and convertible offerings ever executed. Alphabet sold the largest single convertible on record, a $19.3 billion mandatory convertible, while Oracle and Super Micro Computer followed with mandatory structures and CoreWeave returned to the market twice.
For most of its history, the convertible bond was the financing tool of companies that could not get a better deal: unrated growth issuers, biotechs, and occasional balance-sheet repairs. In 2026 it became an instrument of choice for some of the world's largest companies. The mechanics explain the appeal. Convertibles let issuers raise capital with lower cash coupons than straight debt because investors pay for the embedded equity option; when stock volatility is elevated, that option is worth more, so the coupon compresses further. At the same time, mandatory convertibles offer issuers a way to raise equity-like capital with delayed dilution - useful for management teams reluctant to sell shares into a strong market, and attractive to boards that view today's share price as a stepping stone rather than a fair value.
The data show the shift has already happened. Global convertible issuance totaled $56.1 billion across 78 deals in the first quarter of 2026, more than double the first quarter of 2025, according to Numerix. The second quarter set a record at $84.6 billion across 96 deals, a 67 percent increase over the same quarter a year earlier, with North American issuers supplying $64.2 billion of that total. Bank of America Global Research put first-half issuance at $137.5 billion, and LSEG data show roughly $200 billion across the first nine months, up 62 percent year over year. Full-year 2025 issuance was a record $167 billion, meaning 2026 has already surpassed it with a quarter still to run. Bank of America Global Research and Barclays Research reported in May that U.S. convertible sales had reached about $34 billion in the first four months, more than double the prior-year pace.
The refinancing wave adds a second engine. A large cohort of convertibles issued during the pandemic-era low-rate window is approaching maturity, and those issuers face a choice: refinance into a higher-coupon world with straight debt, roll into new equity-linked structures, or repay with cash generated during the AI-driven earnings upcycle. Mizuho's own ECM team flagged this dynamic in 2025, noting that an expected wave of refinancings from Covid-era convertibles would drive an uptick in issuance activity alongside positive equity-market signals.
Cyclical Tailwind Meets Structural Shift
Disentangling the two forces is essential, because they imply different staying power. The cyclical leg is clear and mechanical: elevated equity volatility inflates the value of the embedded option, compressing coupons and making convertibles cheap for issuers. Higher-for-longer interest rates also make the fixed-income component more attractive to investors, and the repo trade for shorting convertibles has become profitable, deepening hedge-fund demand on both sides of the book. If volatility normalizes and rates fall, that pricing advantage shrinks, and issuers who only marginally preferred convertibles will rotate back to straight bonds or follow-on equity.
But the structural leg is larger, and it rests on three changes that do not reverse when the volatility index does. First, the AI capex cycle is financing needs measured in hundreds of billions, not the tens of billions that fit comfortably inside traditional investment-grade windows. When JPMorgan's $697 billion hyperscaler estimate is spread across a handful of companies, each facing multi-year buildouts with cash-flow profiles that differ from legacy corporate debt, the capital stack has to stretch. Equity-linked instruments bridge the gap between debt capacity and dilution aversion in a way that neither plain debt nor plain equity can.
Second, the investor base has broadened. Convertible indices outpacing equities has drawn asset allocators who previously ignored the asset class, and that demand does not vanish when a single volatility spike passes. Numerix noted that convertibles returned 3.72 percent in the first quarter of 2026 even as the S&P 500 fell 4.35 percent - the kind of relative performance that gets a product onto institutional mandates, and keeps it there.
Third, the product itself has migrated up-market. When Alphabet and Oracle use mandatory convertibles, the instrument sheds its residual stigma as a distressed-issuer tool and becomes part of the standard treasury toolkit for blue-chip issuers. That reputational shift is durable: once a financing format is normalized at the top of the market, it rarely retreats all the way back to the fringe.
The cyclical wave will recede; the structural shift will not. Volumes will fall from 2026's record pace when volatility compresses, but the share of corporate financing done through equity-linked products should settle at a higher base than the pre-2025 norm. That is the distinction that matters for a bank deciding whether to hire a global product head.
The Counter-Thesis: This Is a Volatility Trade, Not a New Regime
The strongest argument against the structural read is that convertibles are simply the cheapest funding available in a specific rate-and-volatility configuration, and that history shows issuers rotate back to straight debt or plain equity once that configuration changes. Convertible issuance has surged before - notably in the low-rate 2020-2021 window - only to contract when refinancing waves passed and borrowing costs shifted. From this view, 2026 is a refinancing cycle meeting an AI capex spike, not an institutional break. The falsifying signal is specific: if global convertible issuance falls below $120 billion in 2027 while investment-grade credit spreads remain wider than 150 basis points and the VIX trades below 15, the "new regime" thesis is wrong and 2026 was a cyclical peak. Those thresholds matter because they hold the two cyclical drivers constant - if funding is still cheap and volatility still low, yet issuers abandon converts, the structural argument collapses.
That counter-thesis has force, but it underweights the supply-side constraint. Even in a benign rate environment, the largest issuers face a practical ceiling on straight debt capacity relative to AI-era capex plans, and boards remain averse to issuing equity at perceived peak valuations. Mandatory convertibles and structured equity solutions exist precisely to resolve that tension - which is why the product set, not just this year's volume, is the durable takeaway. The counter-thesis also assumes a return to the pre-2020 world, when capex needs were smaller and equity issuance carried less stigma; neither assumption is secure.
What to Watch
Short term, watch the volatility regime and the issuance calendar. Elevated volatility keeps coupons low and pipelines full; a sustained drop would slow new deals and test whether investor demand was price-driven or structural. The near-term catalysts are the remaining Q4 mandates and the refinancing decisions of pandemic-era issuers coming due in 2027.
Medium term, the key signal is whether non-technology, investment-grade issuers outside the AI complex adopt convertibles and mandatory structures at scale - that is the test of whether the product has truly gone mainstream. Utilities, industrials and healthcare issuers tapping the market would signal broad adoption; a market that remains concentrated in tech and data centers would support the narrower, cyclical read. RBC's own commentary points to a wave of refinancings from Covid-era convertibles maturing, which should keep activity elevated through 2027 regardless of the rate path.
Long term, the hire itself is the tell. Banks do not add a global head of strategic equity solutions in the middle of a cyclical spike; they do it when they expect the product line to carry weight through multiple rate and volatility cycles. Gaut's background - derivatives structuring plus convertible origination, with a healthcare capital-raising track record exceeding $30 billion - matches a desk built for bespoke, cross-product mandates rather than vanilla follow-ons. His move from Mizuho, which has been expanding its own ECM ranks and targeting hires in Korea, India and Australia to capture Asian equity and convertible demand, also signals that the competition for structured-equity talent is heating up across the dealer community.
Three scenarios frame the path ahead. In the base case, issuance moderates from 2026's record but settles well above the pre-2025 base as AI capex and refinancing needs persist. In the upside case, volatility stays elevated and non-tech issuers embrace convertibles, pushing 2027 toward a new record. In the downside case, a sharp equity drawdown compresses volatility and freezes hedge-fund arbitrage demand, sending issuance back toward the $80 billion to $100 billion range that looked exceptional before this cycle.
The deeper lesson for investors is that the financing side of the AI boom is becoming as consequential as the chip orders. When the world's largest companies fund growth with equity-linked instruments at record scale, the cost of capital for the entire buildout is being set in the convertible market - and RBC is betting that market will matter for years, not just quarters.
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