Calamos Convertible & High Income Fund: High Income and High Risk

The Calamos Convertible & High Income Fund (NASDAQ:CHY) is a hybrid closed-end fund that offers high income from existing assets. However, it is considered expensive and riskier than expected for a bond fund due to its complex structure and high fees.

The Calamos Convertible & High Income Fund (NASDAQ: CHY) is a hybrid closed-end fund that offers investors a high level of income from their existing assets. With an impressive 11.73% yield, it stands out compared to both the domestic convertible bond index (2.25%) and the domestic junk bond index (6.71%) [1]. This fund invests primarily in convertible bonds and junk bonds, making it an attractive option for income-oriented investors seeking higher yields.

However, the fund's high yield comes with a caveat: it is considered expensive and riskier than typical bond funds. The fund's complex structure and high fees contribute to this perception. Convertible bonds, while offering potential for capital appreciation, are more volatile than traditional bonds. During market downturns, convertible bonds can behave more like stocks, potentially leading to higher volatility [1].

The fund's performance in recent months highlights this risk. While convertible bonds have shown resilience during market volatility, the fund's performance has been influenced by broader market trends, including a declining U.S. dollar and concerns over U.S. fiscal deficits [1]. These factors have contributed to a capital flight out of U.S. dollar-denominated assets, impacting the demand for fixed-income securities and leading to higher long-term interest rates.

Comparatively, the fund's yield ranks in the middle of its peer group. While it offers a high yield, it is not the highest among convertible bond funds. This suggests that investors may be pricing in the fund's risk and complexity, which could be a positive sign for potential investors [1].

In conclusion, the Calamos Convertible & High Income Fund offers a high yield but comes with higher risk and expense. Investors should carefully consider their risk tolerance and the fund's complex structure before making an investment decision. The fund's high yield makes it an attractive option for income-oriented investors, but it is essential to weigh these benefits against the associated risks.

References:
[1] https://seekingalpha.com/article/4784309-chy-expensive-riskier-than-would-be-expected-from-bond-fund