Commentary
Convertibles (CWB) provide exposure to technology and electricity, two sectors that have benefited significantly from the AI infrastructure buildout. Equity markets have rebounded, but pessimism is dominant right now as investors raise concerns about valuations and funding for AI-related companies.
The AI-buildout, specifically, the amount of issuance relative to projected returns from that spending, requires careful observation for a tipping point. Right now, the committee sees constant negativity as a strong signal we are not at that tipping point yet.
The committee decided to maintain a neutral stance regarding duration and curve positioning relative to the benchmark. Securitized allocation also remains neutral relative to the benchmark, while IG credit remains 90% relative. This makes the index’s main differentiator the 5% conviction position in convertible securities.
The details below reflect index positioning relative to the baseline benchmark effective September 1, 2026.
Relative Positioning
90% relative underweight
5% allocation to convertibles
Allocation
| Name | Market Value (%) |
|---|---|
| iShares MBS ETF | 25.83 |
| iShares 3-7 Year Treasury Bond ETF | 15.71 |
| Schwab Short-Term U.S. Treasury ETF | 13.05 |
| Schwab Long-Term U.S. Treasury ETF | 9.07 |
| Vanguard Short-Term Corporate Bond ETF | 7.75 |
| Vanguard Long-Term Corporate Bond ETF | 7.40 |
| Vanguard Intermediate-Term Corporate Bond ETF | 6.40 |
| iShares 7-10 Year Treasury Bond ETF | 4.99 |
| SPDR Bloomberg Convertible Securities ETF | 5.00 |
| iShares Agency Bond ETF | 2.25 |
| iShares BBB Rated Corporate Bond ETF | 2.00 |
| iShares 20+ Year Treasury Bond ETF | 0.55 |