Convertibles having a down year

The ICE BofA All U.S. Convertibles index has returned -21.3% year-to-date through June 17, hurt by falling equity prices and higher interest rates. The convertibles' return trails the Bloomberg U.S. Corporate High Yield index's -13.1%. However, convertibles have outperformed U.S. equities, including the Russell 2000 index, which lost 25.4%, and the Nasdaq Composite index's -30.7% return.

Information technology, with a 32.3% weight at the end of the first quarter, was the ICE BofA All U.S. Convertibles index's highest sector weighting. This was followed by health care, consumer discretionary and communication services.

Faltering stock prices have caused the convertible universe to become less equity sensitive and more like fixed-income instruments. At the end of May, 22% of the ICE BofA All U.S. Convertibles index was considered an equity alternative, and 47% was fixed-income alternatives, according to Calamos Investments. By comparison, about two-thirds of the convertible universe was fixed-income alternatives in February 2009.