Top 3 convertible bond ETFs of the last 5 years

Convertible bonds Exchange Traded Funds (ETFs) have long attracted the attention of investors looking for a balance between potential returns and safety. In this article, we will examine the best three ETFs in this category, those products that have performed strongly over the last five years, highlighting the characteristics, returns, and risks associated with each.

1. Invesco AT1 Capital Bond UCITS ETF Dist

+25.23% (over 5 years)

The Invesco AT1 Capital Bond UCITS ETF Dist emerges as an attractive choice in the convertible bond ETF landscape. Its underlying index, iBoxx USD Contingent Convertible Liquid Developed Market AT1, reflects the performance of financial institutions’ AT1 contingent convertible debt denominated in EUR, USD, and GBP.

The fund’s performance in recent years has shown solid performance, with a positive return of +6.51% in the previous three years. However, it is essential to consider the volatility, which stands at 12.19% over the past year, quite high for the theme, and the three-year maximum drawdown of -22.66%, indicating moderate resistance to market fluctuations.

The strong point of this ETF lies in its low cost, with a Synthetic Expense Indicator (TER) of 0.39% per annum. Furthermore, choosing a total physical replica offers broad coverage of the Coco bond market. The ETF, launched in September 2018, has proven to be a reliable option for investors seeking stability and competitive returns.

2. WisdomTree AT1 CoCo Bond UCITS ETF

+17.18% (over 5 years)

The WisdomTree AT1 CoCo Bond UCITS ETF stands out for its focus on the European CoCo bond market, tracking the iBoxx Contingent Convertible Liquid Developed Europe AT1 index.

The performance of this ETF shows a more moderate trend, with a three-year return of +0.17%. Volatility, however, is higher than its US counterpart, standing at 15.54% over the last year and the maximum three-year drawdown of -24.61% highlights greater sensitivity to market fluctuations.

This product also has a TER of 0.39% per year but, unlike the previous one, this ETF offers a sampling replication approach thus obtaining lower efficiency in terms of replication. The ETF, launched in May 2018, could be suitable for those who want exposure to the European Coco bond market.

3.SPDR Refinitiv Global Convertible Bond UCITS ETF

+26.73% (over 5 years)

The SPDR Refinitiv Global Convertible Bond UCITS ETF presents itself as a relevant option for investors seeking broad global exposure, tracking the Refinitiv Qualified Global Convertible Index.

This ETF’s performance shows a return of +6.77% over the past year, indicating near-term strength. Volatility is contained at 7.10%, making this fund less susceptible to market fluctuations. However, the three-year yield of -7.07% suggests greater volatility in the medium term.
Despite a slightly higher TER of 0.50% per annum, the considerable size of the fund (EUR 506 million) may be attractive for institutional investors. Launched in 2014, this ETF offers broad global coverage and risk-return that can meet the diversification needs of many investors.

Conclusions

In summary, choosing the winner among these three convertible bond ETFs depends on investors’ preferences and goals. The Invesco AT1 Capital Bond stands out for its stability and low costs, making it a solid option for those seeking a balance between returns and security. On the other hand, the WisdomTree AT1 CoCo Bond offers attractive exposure to the European market, albeit with higher volatility.

The real contender may be the SPDR Refinitiv Global Convertible Bond, which, despite having a slightly higher TER, offers a solid yield and broad global diversification. Its sizable size could be attractive to institutional investors looking for greater liquidity.

Disclaimer The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings.

Original article published on Money.it Italy 2024-01-27 16:31:00. Original title: I Top 3 tra gli ETF obbligazionari convertibili negli ultimi 5 anni