When the equities market dips, convertibles moves away from the price at which they can be exchanged for the stock and act more like fixed-income assets. On the other hand, as equities rise, convertibles will act more like stocks. Consequently, the asset class can have smaller up and down swings.

Because of its equity-like traits, CWB 30-day SEC yield is just 1.67% is closer to the dividend yield on the S&P 500 than the yield on 10-year Treasurys though below both. CWB’s yield is also low relative to other corporate bond ETFs sporting the junk label, of which CWB is one with an average credit rating of Baaa1 among its 103 holdings. Still, CWB has its advantages.

“As a result, the result of the allocation to consumer discretionary and information technology sector, the fund has a cyclical tilt,” said Mazza. “In our current, slow growth expansion, convertibles offer cyclical growth exposure, but have the added benefit of stable income and a bond floor if prospects go south.” [Convertibles on the Cheap]

Other CWB advantages include convertibles’ status as the top-performing bonds when rates rise and an expense ratio of just 0.4%, more than 70 basis points below the average actively managed convertible bond mutual fund.

SPDR Barclays Convertible Securities ETF