Barclays Capital | Convertibles Research
May 13, 2009
2
Introduction
The purpose of this report is to provide an overview of the newly launched SPDR BarclaysCapital Convertible Bond ETF (Bloomberg Ticker: CWB US Equity). It is offered by StateStreet Global Advisors with the aim of providing access to the convertible bond market to abroad base of investors. The Fund is designed to track the performance of the BarclaysCapital U.S. Convertible $500MM+ Index. It first started trading on April 16 and currently hasa market cap of $31 million.
Barclays Capital U.S. Convertible Indices
Launched in January 2003, the Barclays Capital U.S. Convertible Indices are designed toprovide investors with a comprehensive, unbiased performance tool to assist them inportfolio management and benchmarking goals, and relevant statistics regarding theconvertible universe.The Barclays Capital U.S. Convertible $500MM+ Index is a member of the U.S. ConvertibleIndices and includes securities that fit the following criteria:1.
Minimum of $500 million size outstanding (or accreted face value for Zeros/OID)2.
Non-called, non-defaulted securities3.
At least 31 days until maturity, and4.
U.S. dollar denominated 144A or Registered convertible tranches.At any point in time, the Barclays Capital U.S. Convertible $500MM+ Index contains twoseparate universes of data: Returns and Statistics. The returns universe is set at thebeginning of each month and remains static for the entire month. If a security falls out of the Barclays Capital U.S. Convertible $500MM+ Index during the month (falls belowminimum size outstanding, defaults, is called, etc.), it will still contribute to returns for theexisting month but will be absent from the following month’s returns.On the other hand, the statistics universe is based on a dynamic set of securities thatchange according to index criteria. If a security fails to meet the minimum index criteria, itwill drop out of the statistics universe (but will still contribute to end of month returns data).Also, securities that meet the minimum index criteria, including new issues, may enter theStatistics universe during the month but will not contribute to returns for that month.Therefore, the number of securities comprising the statistics universe will often differslightly from the returns universe.As of 05/12/2009, the Barclays Capital U.S. Convertible $500MM+ Index contains 134issues and all four major classes of convertible securities (i.e. cash pay bonds, zeros/OIDs,preferreds and mandatories) with a market value of around $110B. Index data is updated ona daily basis. All returns are market value weighted. Total return will be the sum of pricereturn plus coupon return. Year to date, the Barclays Capital U.S. Convertible $500MM+Index has delivered a total return of 16.75% compared with the S&P 500 YTD total return of 1.57%.Figure 1 and 2 below show the proportion of Barclays Capital U.S. Convertible $500MM+Index relative to the Barclays Capital U.S. Convertible Composite Index (a proxy for thewhole U.S. convert market). The securities in the Barclays Capital U.S. Convertible $500MM+Index represent 20% of the Composite Index in terms of number of securities, but 54% in
Leave a Comment