Up until this week, finding an index of convertible bonds has been limited to just a single participant in the exchange-traded fund world. The SPDR Barclays Convertible Securities ETF CWB debuted in 2009 and has been able to successfully gather over $3 billion in total assets.
Convertible Bonds
These securities essentially function as a hybrid debt and equity instrument that can take on characteristics of each asset class. For this reason, convertible bonds are considered an alternative income solution that is prized for a low overall sensitivity to interest rates.
New Peer In Town: iShares Convertible Bond ETF
The underlying index that ICVT tracks will allow for smaller companies to be admitted than the larger issue size restrictions imposed by CWB. This lower band will broaden the universe of available bonds for entry into the ICVT index and ultimately create a more diversified mix of securities.
At launch, this ETF has top holdings in convertible bonds from Intel Corporation INTC, Telsa Motors Inc TSLA, and Priceline Group Inc PCLN.
Sector Weight
Broad Look At Fixed-Income Markets
This unique area of the income marketplace may warrant greater attention in coming years as ETF investors face the threat of rising interest rates weighing on prices of traditional fixed-income securities.
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