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iShares Convertible Bond ETF holds over 300 cash pay convertible bonds, with a focus on technology and consumer cyclicals. ICVT's track record is underwhelming: risk metrics are similar to those of a stock index while return is much lower, and distribution history was a roller-coaster. However, ICVT's correlation to stocks can enhance a tactical bond ETF portfolio during stock market uptrends.
iShares Convertible Bond ETF has been stagnant compared to broader U.S. indices despite strong equity markets, particularly in tech. The equity component in the ICVT ETF, which is also exposed 40% to tech issues, should start to catch up. Moreover, we think maturity walls should start transmitting the more restrictive policy into markets and could allow for rate hikes soon to help the fixed income component.
Convertible bonds offer the potential for high rewards and diversification in a volatile market. The iShares Convertible Bond ETF is a recommended investment for 2024 due to its potential for competitive total returns. ICVT allows investors to participate in the resurgence of convertible securities and offers a balanced approach between stocks and bonds.
iShares Convertible Bond ETF portfolio holds over 300 cash-pay convertible bonds. Technology represents 38% of asset value. Correlation to stocks may mitigate risks in a bond ETF portfolio or a tactical allocation strategy.
FAQ
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