The Rare 10% Yielder That Delivers On Risk-Adjusted Performance
And Distribution Stability
Every week, we’ll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.
Over the past 2-3 years, the fixed income market has been tough sledding. Even though interest rates have risen to the point where yields on many products are competitive again, the losses incurred on previously low-yielding securities have been significant and painful. The markets thought they were turning the corner when it looked like the Fed was poised to begin cutting rates, but that’s been delayed indefinitely. Even now, yields are still elevated and the new “higher for longer” regime from the Fed could push them higher still before all is said and done.
Convertibles have been able to provide a nice middle ground with these hybrid securities offering the yield of fixed income with the upside of equities. Since equities have been rallying for about 18 months straight, convertibles have helped make sure that investors preferring to stay on the more defensive end haven’t missed out on these gains altogether. The Calamos Convertible Opportunities & Income Fund (CHI) isn’t necessarily a pure play on convertibles since it adds the ability to invest in junk bonds, bank loans and other income-producing securities to produce a yield that currently exceeds 10%. If the portfolio can risk-manage appropriately, it could be an intriguing option for yield seekers.
Fund Background
CHI seeks total return through capital appreciation and current income by investing in a diversified portfolio of convertible securities and high-yield corporate bonds. It seeks to be less susceptible to rising interest rates than traditional fixed-income funds and invests in a broad range of security types to actively manage risk/reward characteristics over full market cycles. It also utilizes leverage in order to enhance yield and total return potential.
Keep reading with a 7-day free trial
Subscribe to The Lead-Lag Report to keep reading this post and get 7 days of free access to the full post archives.