ETF Spotlight on the SPDR Barclays Convertible Securities ETF (CWB) , part of an ongoing series.
Assets : $2.89 billion
Objective : The Barclays U.S. Convertible Securities ETF tries to reflect the performance of the Barclays U.S. Convertible Bond > $500MM Index, which is comprised of U.S. convertible securities with outstanding issue sizes greater than $500 million.
Holdings : Top holdings include Wells Fargo Company 7.5 12/31/2049 4.5%, Gilead Sciences Inc 1.625 05/01/2016 3.5%, Bank of America Corp 7.25 12/31/2049 3.3%, Intel Corp 3.25 08/01/2039 3.1% and Wellpoint Inc. 2.75 10/14/2042 2.26%.
What You Should Know :
- State Street Global Advisors sponsors the fund.
- CWB has a 0.40% expense ratio.
- The ETF has 96 holdings and the top ten components make up 26.4% of the overall portfolio.
- Sector allocations include technology 37.2%, consumer non-cyclical 16.6%, finance 14.9%, consumer cyclical 6.8%, utility 5.7%, communications 4.7%, energy 4.7%, basic industry 4.5%, capital goods 4.4% and transportation 0.7%.
- Credit quality breakdown includes Aaa 0.3%, A 8.8%, Baa 26.7%, below Baa 34.2% and not rated 29.9%.
- The fund’s portfolio has an average maturity of 13.6 years.
- CWB shows a 3.24% 12-month yield.
- The ETF is down 0.6% over the past month, up 3.9% over the last three months and up 8.5% year-to-date.
- The fund is up 3.7% above its 200-day exponential moving average.
- Convertible bonds, or cocos, are securities that can be exchanged, at the option of the holder, for a specific number of shares of the issuer’s preferred stock or common stock.
- In the corporate capital hierarchy, convertibles are senior to equities but subordinate to traditional bonds.
- “Individual convertible bonds are arbitrage instruments (many investors think of them as a bond with an embedded call option), but when many different convertibles are held in a fund like CWB, the resulting portfolio blends the qualities of stocks and bonds in one instrument,” according to Morningstar analyst Abby Woodham.
- “An investment in CWB makes sense for income investors willing to sacrifice some return for downside protection and extra yield,” Woodham added. “CWB is not a bond substitute, as its volatility is several times greater than that of a typical fixed-income fund.”
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