CHY: Expensive And Riskier Than Would Be Expected From A Bond Fund

2025-05-09 10:15:55 ET

Summary

• The Calamos Convertible & High Income Fund offers a high yield of 11.73%, higher than domestic convertible and junk bond indices, appealing to income-oriented investors.
• Convertible bonds, less volatile than stocks, provide downside protection and upside potential, making them suitable for risk-averse investors, including retirees.
• The fund's recent underperformance is due to its high leverage and significant exposure to the underperforming technology sector, despite its overall potential for reduced volatility.
• This fund has 40% of its convertible bond holdings invested in the technology sector, which is higher than the index.
• Trading at a 2.70% premium to NAV, the fund is more expensive than its peers, suggesting caution for potential investors despite its long-term average premium.

The Calamos Convertible & High Income Fund ( CHY ) is a hybrid closed-end fund that investors can purchase as a means of earning a very high level of income from the assets that they already possess in their portfolios. The fund manages to do quite well at this task, as it boasts a whopping 11.73% yield at the current share price. This is substantially higher than the yields of either the domestic convertible bond or the domestic junk bond indices right now:

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