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2 Good Funds for Convertible Bond Investors

Bronze-rated MainStay MacKay Convertible and Columbia Convertible Securities have different investment frameworks but have rewarded investors.

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Zachary Patzik: The Morningstar convertible securities category is a small group of funds that focuses on unique and hybrid issues. MainStay MacKay Convertible and Columbia Convertible Securities both earn Morningstar Analyst Ratings of Bronze. Each of these offerings are led by experienced portfolio managers that have large and capable analyst teams at their disposal. However, each of these funds have been successful through different approaches.

The MainStay MacKay Convertible team quantitatively screens the convertible universe to exclude companies with small market capitalizations and those with low issuance, as well as busted securities with bondlike characteristics and deep-in-the-money convertibles, which are equity-sensitive and trade in tandem with company stock. Ultimately the team looks for catalysts, such as share repurchase programs or restructurings that they believe will support stock price appreciation in a six- to 18-month period. The resulting portfolio is generally more concentrated than its peers.

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Zachary Patzik does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.