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Trending: Top Three Convertible Bond Funds

convertible bonds sign
MutualFunds.com analyzes the search patterns of our visitors every two weeks to find the top trending funds. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.

 
First, we select the top trending category from more than 200 categories listed on MutualFunds.com based on the percentage increase in monthly viewership. From the top trending category, we select the top three funds with the highest one-year trailing total returns. To ensure the quality and staying power of funds, we only look at those mutual funds with a minimum of $200 million in assets and a track record of at least one year. We also remove those mutual funds that are closed to new investors and are not available for investment outside registered accounts such as retirement or 529 accounts.

In this week’s edition, we analyze the top three Convertible Bond Funds. These funds specifically invest in convertible bonds that combine elements of common stocks and bonds.

Convertible bonds pay a fixed interest rate but, unlike conventional bonds, investors can exchange them for a predetermined amount of common stock. When the issuer’s stock price rises, the price of its convertible bonds tends to rise in lockstep. When the stock price falls, convertible bonds tend to behave more like conventional bonds. Most convertible bonds are below investment grade (e.g., junk bonds), which makes it important to pick professional fund managers with the ability to spot opportunities.

Our breakdown of each fund includes key aspects, such as one-year performance, fund expenses, investment style, and management teams to give you an overview of how these funds hold up against their peers.

Be sure to check out the Convertible Bond Funds page to find out more about other funds in this category as well.

Trending Funds

The top three funds in this category are broken down further below.

1. AllianzGI Convertible A (ANZAX)

The top fund in our list this week is the AllianzGI Convertible A (ANZAX) fund. It has a stellar 62.63% trailing one-year total return. The net expense ratio of 0.98% puts it in the middle of the road compared to similar funds in the category and other funds on our list.

The fund’s strategy is to invest at least 80% of its net assets in convertible securities, including corporate bonds, debentures, notes or preferred stock, and their hybrids that can be converted into equity securities or other securities (e.g., warrants or options) that provide an opportunity for equity participation.

The fund is co-managed by Douglas Forsyth, CFA, Portfolio Manager, Managing Director, and CIO, U.S. Income and Growth Strategies, with Allianz Global Investors, who has been a fund manager since December 1994. He’s joined by Justin Kass, CFA, Portfolio Manager and Managing Director with Allianz Global Investors, who joined the team in December 2003.

The fund’s portfolio currently holds 141 assets across the utilities (60.9%), industrials (30.8%), and healthcare (8.3%) sectors. Within these sectors, the fund holds 82.6% convertible bonds, 11.7% preferred stock, 3% stock, and 2% cash. The largest holdings include Tesla Inc. (6.5%), Broadcom Inc. (2.1%), and Microchip Technology Inc. (1.92%).

ANZAX Barchart Interactive Chart 02 16 2021
 

Learn more about different portfolio management concepts here.

2. Columbia Convertible Securities A (PACIX)

The number two fund on our list this week is the Columbia Convertible Securities A (PACIX) fund. The fund delivered a solid 55.86% one-year return over the past year, but a net expense ratio of 1.17% that puts it on the high end of the funds in our list.

The fund’s strategy is to invest at least 80% of its net assets in convertible securities, including up to 15% of total assets in Eurodollar convertible securities and up to 20% of its total assets in foreign securities. In addition, the fund may also invest directly in equity securities.

The fund is managed by Yan Jin, VP and Senior Portfolio Manager of Income Strategies with Columbia Threadneedle Investments, David King, Senior Portfolio Manager with the Asset Allocation Team at Threadneedle Investments, and Grace Lee, who joined the team in October 2020.

The fund’s portfolio holds 122 assets across the utilities (53.6%), technology (18.7%), and healthcare (10.3%) sectors. Within these sectors, the fund holds 79.5% convertible bonds, 9.8% stocks, and 8.4% preferred stock. The largest holdings include Tesla Inc. (6.2%), Nextera Energy Inc. (2.7%), and Square Inc. (2.5%).

PACIX chart
 

Find out about the funds suitable for your portfolio by using our free Screener.

3. Fidelity® Convertible Securities (FCVSX)

The third place on the list belongs to the Fidelity® Convertible Securities (FCVSX) fund. It generated a solid trailing one-year return of 52.66% with a 0.63% expense ratio, making it the lowest cost fund on the list.

The fund’s strategy is to invest at least 80% of its assets in convertible securities, including both domestic and foreign issuers. Using a combination of fundamental analysis and economic sentiment, the fund managers aim to select investments with a balanced risk-to-reward ratio.

The fund is managed by Adam Kramer, Portfolio Manager in the Fixed Income division at Fidelity Investments, who has been managing the fund for almost five years.

The fund’s portfolio consists of 389 assets concentrated in utilities (30%), energy (20%), and technology (16%). Within these sectors, the fund holds 69% convertible bonds, 17% stocks, and 11.4% preferred stock. The largest holdings include Tesla Inc. (6.11%) and Euronav NV (2.34%).

FCVSX Barchart Interactive Chart 02 16 2021
 

Want to know more about portfolio rebalancing? Click here.

The Bottom Line

Convertible bond funds tend to perform well when equities are on the rise, and over the past year, Tesla Inc.’s explosive growth has been a key driver of convertible bond fund returns. While convertible bonds tend to be below investment grade, these bond funds can help diversify that risk and provide equity upside to conventional fixed income portfolios.

Make sure to visit our News section to catch up with the latest news about mutual fund performance.

Note: Data as of February 15, 2021.


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convertible bonds sign

Trending: Top Three Convertible Bond Funds

MutualFunds.com analyzes the search patterns of our visitors every two weeks to find the top trending funds. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.

 
First, we select the top trending category from more than 200 categories listed on MutualFunds.com based on the percentage increase in monthly viewership. From the top trending category, we select the top three funds with the highest one-year trailing total returns. To ensure the quality and staying power of funds, we only look at those mutual funds with a minimum of $200 million in assets and a track record of at least one year. We also remove those mutual funds that are closed to new investors and are not available for investment outside registered accounts such as retirement or 529 accounts.

In this week’s edition, we analyze the top three Convertible Bond Funds. These funds specifically invest in convertible bonds that combine elements of common stocks and bonds.

Convertible bonds pay a fixed interest rate but, unlike conventional bonds, investors can exchange them for a predetermined amount of common stock. When the issuer’s stock price rises, the price of its convertible bonds tends to rise in lockstep. When the stock price falls, convertible bonds tend to behave more like conventional bonds. Most convertible bonds are below investment grade (e.g., junk bonds), which makes it important to pick professional fund managers with the ability to spot opportunities.

Our breakdown of each fund includes key aspects, such as one-year performance, fund expenses, investment style, and management teams to give you an overview of how these funds hold up against their peers.

Be sure to check out the Convertible Bond Funds page to find out more about other funds in this category as well.

Trending Funds

The top three funds in this category are broken down further below.

1. AllianzGI Convertible A (ANZAX)

The top fund in our list this week is the AllianzGI Convertible A (ANZAX) fund. It has a stellar 62.63% trailing one-year total return. The net expense ratio of 0.98% puts it in the middle of the road compared to similar funds in the category and other funds on our list.

The fund’s strategy is to invest at least 80% of its net assets in convertible securities, including corporate bonds, debentures, notes or preferred stock, and their hybrids that can be converted into equity securities or other securities (e.g., warrants or options) that provide an opportunity for equity participation.

The fund is co-managed by Douglas Forsyth, CFA, Portfolio Manager, Managing Director, and CIO, U.S. Income and Growth Strategies, with Allianz Global Investors, who has been a fund manager since December 1994. He’s joined by Justin Kass, CFA, Portfolio Manager and Managing Director with Allianz Global Investors, who joined the team in December 2003.

The fund’s portfolio currently holds 141 assets across the utilities (60.9%), industrials (30.8%), and healthcare (8.3%) sectors. Within these sectors, the fund holds 82.6% convertible bonds, 11.7% preferred stock, 3% stock, and 2% cash. The largest holdings include Tesla Inc. (6.5%), Broadcom Inc. (2.1%), and Microchip Technology Inc. (1.92%).

ANZAX Barchart Interactive Chart 02 16 2021
 

Learn more about different portfolio management concepts here.

2. Columbia Convertible Securities A (PACIX)

The number two fund on our list this week is the Columbia Convertible Securities A (PACIX) fund. The fund delivered a solid 55.86% one-year return over the past year, but a net expense ratio of 1.17% that puts it on the high end of the funds in our list.

The fund’s strategy is to invest at least 80% of its net assets in convertible securities, including up to 15% of total assets in Eurodollar convertible securities and up to 20% of its total assets in foreign securities. In addition, the fund may also invest directly in equity securities.

The fund is managed by Yan Jin, VP and Senior Portfolio Manager of Income Strategies with Columbia Threadneedle Investments, David King, Senior Portfolio Manager with the Asset Allocation Team at Threadneedle Investments, and Grace Lee, who joined the team in October 2020.

The fund’s portfolio holds 122 assets across the utilities (53.6%), technology (18.7%), and healthcare (10.3%) sectors. Within these sectors, the fund holds 79.5% convertible bonds, 9.8% stocks, and 8.4% preferred stock. The largest holdings include Tesla Inc. (6.2%), Nextera Energy Inc. (2.7%), and Square Inc. (2.5%).

PACIX chart
 

Find out about the funds suitable for your portfolio by using our free Screener.

3. Fidelity® Convertible Securities (FCVSX)

The third place on the list belongs to the Fidelity® Convertible Securities (FCVSX) fund. It generated a solid trailing one-year return of 52.66% with a 0.63% expense ratio, making it the lowest cost fund on the list.

The fund’s strategy is to invest at least 80% of its assets in convertible securities, including both domestic and foreign issuers. Using a combination of fundamental analysis and economic sentiment, the fund managers aim to select investments with a balanced risk-to-reward ratio.

The fund is managed by Adam Kramer, Portfolio Manager in the Fixed Income division at Fidelity Investments, who has been managing the fund for almost five years.

The fund’s portfolio consists of 389 assets concentrated in utilities (30%), energy (20%), and technology (16%). Within these sectors, the fund holds 69% convertible bonds, 17% stocks, and 11.4% preferred stock. The largest holdings include Tesla Inc. (6.11%) and Euronav NV (2.34%).

FCVSX Barchart Interactive Chart 02 16 2021
 

Want to know more about portfolio rebalancing? Click here.

The Bottom Line

Convertible bond funds tend to perform well when equities are on the rise, and over the past year, Tesla Inc.’s explosive growth has been a key driver of convertible bond fund returns. While convertible bonds tend to be below investment grade, these bond funds can help diversify that risk and provide equity upside to conventional fixed income portfolios.

Make sure to visit our News section to catch up with the latest news about mutual fund performance.

Note: Data as of February 15, 2021.


Sign up for Advisor Access

Receive email updates about best performers, news, CE accredited webcasts and more.

Popular Articles

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.


Read Next