2024-07-15 05:15:11 ET
Summary
- Calamos Convertible Opportunities and Income Fund aims to provide high current income through convertible securities, outperforming investment-grade bonds year-to-date.
- The Fund's yield is reasonable at 9.61%, which beats the indices but is below some of its peers.
- The Fund's leverage looks a bit high, and it has surprisingly increased over the past few months.
- The Fund has managed to fix the distribution coverage problem, and it does appear that it is now capable of sustaining it for quite a while.
- The fund is incredibly expensive, which makes it difficult to recommend.
The Calamos Convertible Opportunities and Income Fund ( CHI ) is a closed-end fund that aims to provide investors with a very high level of current income. This is hardly unusual, as many closed-end funds have the same basic goal. As is the case with many Calamos funds, though, this one has a rather unique method of achieving its goals. The fund invests heavily in convertible securities, which frequently perform more like common equities than bonds. It is not a perfect correlation, of course, but these securities have outperformed investment-grade bonds year-to-date:
As we can see, the iShares Convertible Bond ETF ( ICVT ) outperformed the Bloomberg U.S. Aggregate Bond Index ( AGG ) year-to-date, despite the bond index having a higher yield. This is due to the convertible feature possessed by these bonds, which becomes more valuable as the stock price of the issuing company rises. Obviously, though, we cannot expect these securities to match the performance of a common stock index during a bull market. They do tend to have higher yields, though, and the Calamos Convertible Opportunities and Income Fund is able to pass this through to its shareholders. As of the time of writing, the fund boasts a 9.61% yield. This is very reasonable compared to the yields of either equities or bonds:
Index/Index ETF | Current Yield |
Calamos Convertible Opportunities and Income Fund | 9.61% |
S&P 500 Index ( SP500 ) | 1.30% |
Bloomberg U.S. Aggregate Bond Index | 3.44% |
Bloomberg High Yield Very Liquid Index ( JNK ) | 6.57% |
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For further details see:
CHI: This Convertible Fund Is Greatly Improved, But It Is Still Far Too Expensive