Seven of the most interesting convertible mutual funds in the US

Convertible mutual funds play an important role in financial markets having the total number of open-end funds worldwide increase by 40% from 2011 to 2020. Almost half of these funds are located in the United States alone. Convertible bond portfolios offer part of the capital-appreciation potential of stock portfolios and also supply some of the safety and yield of bond portfolios. This article will uncover the top seven convertible mutual funds in the US.

What are Convertibles?

Convertibles are securities, mainly bonds or preferred shares, that are able to be converted into common stock. A FINRA license is typically involved for the purpose of regulating the trading of these instruments in the US. Convertibles, oftentimes associated with convertible bonds, allow bondholders to convert their creditor position into an equity holder at an agreed-upon price. If investors are seeking greater potential for appreciation than bonds can provide, and a higher income than common stocks can provide, then convertibles are the best choice. Convertible bonds do commonly offer a lower coupon than a standard bond, but the option to convert the bond to common stocks is extremely valuable to bondholders. Seeing that convertible bonds are considered to be debt, the company will agree to pay the investor a set rate of interest in exchange for the use of the investor funds. We have compiled a list of the top seven convertible funds in the US to assist investors in choosing the perfect fund for them:

Victory INCORE Investment Grd Convert Fd (SBFCX)

This fund aims to provide a high level of current income with long-term capital appreciation. The fund invests at least 80% of its assets in investment grade securities convertible into common stock and synthetic convertible securities. There are derivative positions composed of two or more securities and have investment characteristics that resemble traditional convertible securities. Regarding performance, the fund returned 25.70% over the past year, 11.94% over the past three years, 12.02% over the past five years and 9.17% over the past decade. The fees are average with an expense ratio of 1.38% and, according to Morningstar, the risks are below average.

Virtus AllianzGI Convertible Fd (ANZAX)

The fund aims to provide maximum total return, consisting of capital appreciation and current income. The fund invests at least 80% of its net assets in convertible securities. These include corporate bonds, debentures, notes or preferred stocks and their hybrids that can be exchanged for equity securities or other securities which allows equity participation. Regarding performance, the fund returned 46.01% over the past year, 24.99% over the past three years, 20.88% over the past five years and 13.29% over the past decade. The fees are below average with an expense ratio of 0.96% and, according to Morningstar, the risks are high.

Calamos Convertible Fund (CCVIX)

The fund’s main objective is seeking current income, with growth being its second. The fund invests at least 80% of its net assets in a portfolio of convertible securities by US companies and may invest up to 25% of its net assets in foreign companies with regard to market capitalization. Regarding performance, the fund returned 35.21% over the past year, 20.33% over the past three years, 17.46% over the past five years and 10.16% over the past decade. The fees are below average with an expense ratio of 1.13% and, according to Morningstar, the risks are average.

Lord Abbett Convertible Fund (LACFX)

The fund’s main objective is seeking current income with the opportunity for capital appreciation to produce a high total return. The fund invests at least 80% of its net assets, plus borrowings, in a portfolio of convertible securities by US and foreign companies. These include corporate bonds, debentures, notes or preferred stocks and their hybrids that can be exchanged for equity securities or other securities which allows equity participation. Regarding performance, the fund returned 41.57% over the past year, 24.33% over the past three years, 20.78% over the past five years and 12.23% over the past decade. The fees are below average with an expense ratio of 1.06% and, according to Morningstar, the risks are above average.

Rational/Pier 88 Convertible Secs Fd (PBXAX)

The fund aims to achieve total return, which consists of capital appreciation and income. The fund invests at least 80% of its net assets, plus borrowing, in convertible securities. The fund generally invests in investment-grade instruments. Regarding performance, the fund returned 20.03% over the past year. The fees are below average with an expense ratio of 1.24%.

Columbia Convertible Securities Fund (PACIX)

The fund aims to achieve total return, which consists of capital appreciation and income. The fund invests at least 80% of its net assets, plus borrowing, in convertible securities. It may invest up to 15% of total assets in Eurodollar convertible securities, up to an additional 20% in total assets in foreign securities and may invest directly in equity securities. Regarding performance, the fund returned 42.82% over the past year, 22.96% over the past three years, 19.82% over the past five years and 12.57% over the past decade. The fees are below average with an expense ratio of 1.12% and, according to Morningstar, the risks are above average.

Miller Convertible Bond Fund (MCFAX)

The fund aims to maximise total return by compromising current income and capital appreciation which is consistent with the preservation of capital. The fund invests at least 80% of its net assets, plus borrowing, in convertible bonds. Convertible bonds include synthetic convertible bonds and other securities that are identified to have characteristics similar to convertible bonds. Regarding performance, the fund returned 18.28% over the past year, 8.67% over the past three years, 7.83% over the past five years and 6.54% over the past decade. The fees are average with an expense ratio of 1.49% and, according to Morningstar, the risks are low.

The takeaway 

When choosing to invest in a mutual fund, investors should do research into the performance, fees and risks of the funds before making a decision. The mentioned convertible funds are at the top of their categories, so it won’t be hard to find one that’s perfect for any portfolio.