Featuring:
Tony Huang
Portfolio Manager
Advent Capital Management
Tune in as Tony Huang of Advent Capital Management discusses the Advent Convertible and Income Fund (AVK), current opportunities in convertibles and high yield, and how the fund's income-focused strategy may help investors navigate today's market environment.
Advent Capital Management is the Investment Adviser of the Advent Convertible and Income Fund (AVK). The Servicing Agent for the Fund is Guggenheim Funds Distributors. Learn more here.
Transcript
CEFA:
Welcome to CEF Insights, your source for closed-end fund information and education, brought to you by the Closed-End Fund Association.
Today we are joined by Tony Huang, Portfolio Manager with Advent Capital Management. Advent manages the Advent Convertible and Income Fund, ticker AVK.
We're happy to have you with us today, Tony.
Tony Huang:
It's great to be here. Thanks for having me on this podcast.
CEFA:
Tony, the Advent Convertible and Income Fund invests in both convertible and high-yield securities. How do these two components complement each other, and how do you allocate between them in managing the portfolio?
Tony Huang:
Well, both convertibles and high yield are both corporate bond asset classes. We've got an integrated research team where they focus on sectors where they can cross security types, and this feeds off of similar evaluation skills used, and they can go to the security that has the best risk reward. These two asset classes, convertibles and high yield are both shorter duration than most fixed-income asset classes. So used together, they may be a good complement to a fixed-income allocation. They depend on corporate profits growing, but they don't take as much interest rate risk as other kinds of bonds. Now, some of the characteristics differ, convertibles key off equity movements. But when one or the other type provides a better risk reward, we take that into account in the allocation.
CEFA:
How do you see convertible securities generally positioned in the current market conditions?
Tony Huang:
There are some intriguing trends in convertibles now. The asset class has more exposure to growth industries. Issuers in growth mode, they don't mind as much issuing a convertible and it resulting in some equity dilution as they pursue their growth aspirations. There are many growth industries benefiting from opportunities in the economy now, most prominently in industries such as electronics, power, and some commodities, and a lot of this is due to demand for AI applications. Many of these companies look to convertibles for their capital needs, and some have seen improving credits and surging equities with the convertible prices rising accordingly. Now, there's a second element here specific to convertibles. Equity volatility has been rising, partly due to the opportunities in AI and the economy overall, but partly also uncertainty in various geopolitical theaters. Some of them stem from policies of the current administration in charge in Washington. The VIX index, which is a measure of short-term equity volatility, has been in an uptrend since mid-2024. Convertibles rise in value and equity volatility does. They are long end equity options. So, these two aspects have led to recent strong returns in the convertible asset class.
CEFA:
Tony, the Iran conflict has introduced some volatility in markets. Corporate earnings have been strong, but inflation has been stubborn. How has AVK performed over the first five months of 2026?
Tony Huang:
May isn't over yet as we record this, but as of late in the month, AVK's NAV assuming reinvestment of dividends, which is the closed end fund market standard, is in excess of 15% so far in 2026. Now, I should give an appropriate caveat that past performance doesn't guarantee future results and performance may fluctuate, but returns have been over 15% thus far in 2026.
CEFA:
What is your view of high-yield fixed income in the current market?
Tony Huang:
The big driver of high-yield returns is corporate profits. High corporate profits support credit stability and refinancing ability. S&P 500 corporate profits are quite strong now. They've been growing at a pace in recent quarters of over 10% and accelerating. The credit quality of the high-yield market has continued to improve with more and more issuers having BB ratings. This is the highest rating within the high-yield universe. So, we think as long as corporate profits are growing robustly, high-yield investors could be able to realize at least the strong coupons and the fund would realize meaningful current income that way.
CEFA:
Are you finding valuations for convertibles and high yield to be at attractive levels?
Tony Huang:
Both convertibles and high yield are helped by rising corporate profits. The largest sector in yield is energy, which has some profit tailwinds given recent events. Convertibles have been benefiting from the AI demand I spoke of and volatility rising. So, in different ways, these are factors that may support valuations in both asset classes.
CEFA:
What are the key risks you are monitoring in the current market environment?
Tony Huang:
Well, if inflation were to get out of hand, it might affect equity valuations as they did in 2022. Fixed-income prices would be hurt too, but convertibles and high yield would be less affected by that as there are not many issuances maturing beyond 10 years in either market. So, both markets have less duration than other fixed-income asset classes. Corporate profits, they need to remain on a growth trajectory that has important impacts on credit spreads and equity valuations. So, we are continually monitoring those risks both at individual companies and in the macro environment.
CEFA:
How is AVK currently positioned?
Tony Huang:
Well, as of the end of April, the asset allocation was as follows: 52% in convertible securities, 35% in high-yield securities, and the remaining in small allocations to smaller asset classes like equities, bank loans, and CLO securities.
CEFA:
Tony, how do you see an allocation to a strategy like AVK best positioned in an income-oriented investor's portfolio?
Tony Huang:
AVK has a distribution of approximately 10% on recent NAV, and the distribution per share has been consistent for many years. The underlying asset classes are benefiting from corporate profit growth and the robust demand for AI investment. So combined, these two asset classes have lower interest rate risk because the maturities and duration are lower, this is an attractive combination to complement a fixed-income portfolio.
CEFA:
Tony, thank you so much for taking the time to join us today.
Tony Huang:
Thanks for inviting me.
CEFA:
And we want to thank you for tuning into another CEF Insights podcast. For more educational content, please visit our website at www.CEFA.com.
Podcast recorded May 2026.
Disclosure
This material is not and is not intended as investment advice, an indication of trading intent or holdings or the prediction of investment performance. All fund-specific information is the latest publicly available information. All other information is current as of the date of this presentation. All opinions and forward-looking statements are subject to change at any time.
Advent Capital Management disclaims any responsibility to update such views and/or information. This information is deemed to be from reliable sources; however, Advent does not warrant its completeness or accuracy. This presentation is not intended to, and does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any security, product, investment advice or service (nor shall any security, product, investment advice or service be offered or sold) in any jurisdiction in which Advent is not licensed to conduct business, and/or an offer, solicitation, purchase or a sale would be unavailable or unlawful.