How to Get Stocks’ Upside With Protection on the Downside

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Convertible bonds are hybrid securities that pay a fixed interest rate and allow investors to exchange the debt for the issuing company’s shares if the stock...

Convertible bonds are getting renewed attention as an asset class that offers investors exposure to stocks and bonds while softening the blow on the downside and promising a smoother ride along the way.

“Historically, over a full market cycle, investors have been able to earn similar returns to the equity market, but with about a third less volatility,” he says. Arone says the returns in convertible bonds have been “pretty good” in 2023, with total returns of 2% this year for the $3.4 billion SPDR Bloomberg Convertible Securities exchange-traded fund , compared with negative returns for traditional bonds. The $89 billion broad-market iShares Core U.S. Aggregate Bond ETF is down 2.5% this year.

Calamos has a long history in convertibles and a large stable of funds, including the flagship $837.2 million Calamos Convertible fund and the $121.1 million Calamos Global Convertible fund , both of which are actively managed. In October, the firm launched its first convertibles ETF, the actively managed Calamos Convertible Equity Alternative .

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