Tech Rout Turns $279 Million Credit Fund Into Biggest Laggard

(Bloomberg) -- The worst day for chipmakers in seven weeks hit a far-flung corner of the bond market where the industry is a favorite.

The biggest decliner among U.S. exchange-traded fixed-income funds was the iShares Convertible Bond ETF, ticker ICVT, which fell 2.2 percent Monday to its lowest since February. The ETF tracks U.S.-dollar denominated convertible bonds, a type of debt many fast-growing tech firms -- including chipmakers -- rely on for cheap financing.

The $279 million fund has its heaviest weighting in the semiconductor industry, with debt issued by firms such as Intel Corp. and Microchip Technology Inc. making up 17.9 percent of its portfolio. Internet companies come next, with a 15.8 percent weighting.

Convertible bonds can be sensitive to stock prices, as the securities turn into equity as long as the shares are trading above a conversion price at maturity. In fact, the price of the iShares ETF has closely tracked the performance of the S&P 500 Information Technology Index this year, though a slew of investors still buy the bonds even if they don't expect to receive shares at maturity.

Semiconductor firms fell 4.4 percent Monday, their worst performance since Feb. 8, after a report that Apple Inc. plans to start using its own chips rather than processors made by Intel as soon as 2020.

To contact the reporter on this story: Yakob Peterseil in London at ypeterseil@bloomberg.net.

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Cecile Gutscher, Sid Verma

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