Not many money managers can say they have beaten the stock market—and done so with less volatility—over the past 25 years. Doug Forsyth and Justin Kass can.
They manage the $1.5 billion AllianzGI Convertible fund (ticker: ANZAX), which invests in convertible bonds. These hybrid securities—which can be converted into equity when the companies’ common stock shares trade above a predetermined target, or “conversion” price—offer the downside principal protection of bonds and some of the upside of stocks.
“An ideal convertible should have 60% to 80% of the upside of the underlying equity and 50% or less of its downside,” Kass says. “In a perfect world, our entire portfolio would have these total-return characteristics.” The world hasn’t been perfect, but the fund has performed well nonetheless. AllianzGI Convertible has delivered a 10.3% annualized return since its 1993 inception, versus the S&P 500 index’s 9.6%, and it did this with 7% less volatility. It charges a 5.5% load, which many brokers, such as Fidelity and TD Ameritrade, waive, and has a 0.96% expense ratio.
Over the period Jan 1994 - May 2020, with candidate funds VFINX VUSTX VFITX ANNPX, ANNPX (AllianzGI Convertible Institutional) gets a weight of 19% in the optimal portfolio according to Portfolio Visualizer. Any thoughts on ANZAX?