INSIGHTS &PERSPECTIVESSPECIALTY FIXED INCOME | CONVERTIBLESJUNE 2023

It’s Time to Pay Attention to Convertibles
For investors who seek to reduce the downside riskof equities but still maintain some upside equity
exposure, we believe convertible bonds may be aninteresting alternative. An allocation to convertibles
could lower the risk in a portfolio by combining
elements of fixed income with the potential for equity
upside. The defensive characteristics of convertibles
has allowed the asset class to participate in asmaller percentage of the equity price declines. The
ability to capture the majority of upside of equity
returns, while limiting the downside during thecurrent market selloff (the asymmetric return
profile), is what distinguishes convertible bonds
from other fixed income securities. Convertible
securities have historically provided returns
comparable to U.S. large-cap stocks - on average in rising equity markets and generally have helped
to limit downside participation when stocks werefalling.
Institutional investors have been diversifying their pension
portfolios using this historically defensive, total return.
instrument for many years. Convertible bonds provide
investors with the income stream of bonds as well as thegrowth potential of stocks. Convertibles have the potential toparticipate in the equity markets while giving bond-likedefensive features in turbulent markets. At 2% of the US
investment-grade market and 15% of the US high yield market,
US convertibles are often overlooked by investors. But recent

asset class growth and structural dynamics suggest thatinvestors should consider US convertibles, especially in risingrate and inflationary environments.

Understanding Convertibles
While they are technically bonds, convertibles, in the past,
have performed more like stocks than bonds over time. This islarge part due to its characteristic of having an embedded
equity call option – investors have the right or obligation to
exchange a convertible bond for a pre-determined number ofshares in the issuing company at certain points in the bond’s
lifetime.
Convertibles may provide effective diversification for portfolios,
particularly those that are fixed-income oriented. Unlike
straight bonds, convertibles historically have a negative
correlation to interest rates, because convertible bondperformance is largely driven by the performance of theissuer’s equity. In the past periods when interest rates andinflation rise, equities would advance in tandem with corporate
profits. Also, convertibles do not necessarily mature at theirnominal $1,000 par value. If the underlying equity rises above
the bond’s conversion price, the bond can be converted into
cash or common stock worth more than the bond’s par value.
Owning a fixed-income security whose performance isrelatively independent of interest rates and with capital
appreciation potential may be an advantage in the current
market environment. For investors who seek to reduce thedownside risk of equities but still maintain some upside equity
potential, convertible bonds may be an interesting alternative.
We have seen numerous instances of investors use
convertibles this way, especially in the case of defined benefit
plan sponsors as they near fully funded status or are otherwise
averse to the downside risk of stocks.

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INSIGHTS & PERSPECTIVESSPECIALTY FIXED INCOME | CONVERTIBLESF I G U R E 1 : E F F E C T I V E D I V E R S I F I C A T I O N U S I N G C O N V E R T I B LE S

The addition of convertibles to a bond/stock portfolio pushes the broader fund returns out on the efficient frontier without
adding additional volatility.
C ORRE LATI ON WIT H OTH ER MA J OR A SSET CL AS S E S 1

E FF ICIE NT FR ON TIE R A NAL Y SIS 2

18

Correlation
Asset Class

Annualized Average Total Return

April 1, 2008 –March 31, 2023

0.87

L A R G E - C A P S TO C K S
M I D - C A P S TO C K S

0.92

SMALL-CAP STOCKS

0.88

H I G H Y I E LD C O R P O R A TE B O N D S

0.84

LONG- TERM CORPORATE BONDS

0.50

I N T E R M E D I A T E - T E R M C O R P O R A TE B O N D S

0.62

L O N G - T E R M TR E A S U R Y B O N D S-0.11

INTERMEDIATE-TERM TREASURY BONDS-0.13

100% CONVERTS
100% EQUITIESUS Corp/Govt v. US Cvts

12

POST-CRISISUS Corp/Govt v. US Equities
POST-CRISIS

6

100% CORP/GOVT

0
3

5

7
9
11
13
Annualized Standard Deviation

15

17

1. Source: Morningstar. Please see disclosure page at the end of this presentation for important Correlation Table disclosure.
2. Source: BofA (based on data from BofA Global Research, ICE Data Services LLC, Bloomberg). US Corp/Gov’t: BofA US Corporate & Government Master Index,
US Equities: S&P 500 Index, US Converts: BofA All Convertibles Index. Data from January 1, 1996 to July 31, 2022. The hypothetical returns shown in the
Efficient Frontier Analysis above do not represent the returns of any client portfolio or strategy actually managed by MacKay Shields and should not be
construed as such. The hypothetical returns shown are index-based; MacKay Shields' portfolios are actively managed and would vary from any applicable index.
Therefore, the hypothetical returns are not indicative of investment skill. Actual portfolios would be subject to fees and expenses. No fees or expenses were
included in the hypothetical results.
Hypothetical example, for illustrative purposes only. Please see Additional Disclosures pages at the end of this presentation for important information.
No representation is made as to the accuracy and completeness of information contained in this presentation that has been obtained from third parties.

Asymmetric Return Capture of Convertibles

rising equity markets but generally helped to limit downside
participation when stocks were falling. Over the past 10 years,
the volatility of convertible bonds has been 12% versus 15%
for the S&P 500, according to eVestment data as ofMarch 31, 2023.

Although past performance is not a guarantee of future results,
over the past 20 years, convertible securities have provided
returns comparable to U.S. large-cap stocks—on average—in

F I G U R E 2 : A V E R A G E D R A W D O W N A N D P E R F O R M A N CE R E L A T I V E T O U S E Q U I T Y | CO N V E R T I B L E S V S . U S E Q U I T Y
10 YEARS ENDING MARCH 31, 2023
A VE RA GE DRAW DOWNVOLATILITY1

5.6

14.8
12.4

12.2

9.6

Standard

4.9

ICE BofA All US Convertible

Annualized
ReturnICE BofA All US Convertible

S&P 500

S&P 500

Data as of March 31, 2023
1. Volatility as measured by annualized standard deviation of monthly returns. It is not possible to invest directly in an index. Past performance is not indicative of future
performance. Please see Index Descriptions at the end of this document.
Source: eVestment, Callan Associates.

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INSIGHTS & PERSPECTIVESSPECIALTY FIXED INCOME | CONVERTIBLESFIGURE 3: EQUITY ALTERNATIVE WITH COMPETITIVE UPSI DE AND DOWNSIDE MITI GATION
60%

Total Annual Returns

40%

20%

0%
UPSIDE PARTICIPATION-20%LIMITED DOWNSIDE PARTICIPATIONICE BofA All U.S. Convertibles Index
S&P 500 Index
-40%
2000
Dot Com

2003

2006

2009

Expansion Phase2012

Recovery

2015

2018

2021

YTD
2023

Low Yield Environment

Financial Crisis
Data as of June 15, 2023
Due to market volatility, current performance may be less or higher than the figures shown. It is not possible to invest directly into an index.
Past performance is not indicative of future performance. Please see Index Descriptions at the end of this document.
Source: Callan Associates

The defensive characteristics of convertibles has allowed theasset class to participate in a smaller percentage of the equity
price declines. The ability to capture the majority of upside ofequity returns, while limiting the downside during the current
market selloff (the asymmetric return profile), is what
distinguishes convertible bonds from other fixed income
securities. Historically, converts have only experienced 50% of
the downside risk of stocks while capturing 80% of equity
market returns in up markets. It’s this asymmetric risk andreturn profile that makes the asset class especially appealing.

stocks is the predominant factor, which has historically helped
soften the negative effect of rising interest rates. Adding
convertible bonds to a traditional fixed income portfolio alsooffers the benefit of exposure to sectors, such as IT and
Healthcare, with large weightings in the converts universe but
little to no weight in most fixed income benchmarks. We
believe convertible bonds remain an effective vehicle for thoseseeking to participate in further equity advances. We thinkinvestors should view convertibles as an alternative slice of
their bond allocation.

Making a Strategic Allocation to Convertible Bonds

Unique environments require unconventional thinking. We
believe it’s critical to have a clear understanding of an issuer’s
underlying fundamentals, including its free cash flow, leverageand future business prospects. In our view, this demonstrates
the importance of investing in convertibles with portfolio
managers who have the resources to thoroughly analyze
individual securities.

The addition of convertible bonds may improve the risk/return
profile of a diversified equity and fixed income portfolio.
Convertible bonds’ strong multi-year returns and potential for
limiting downside participation are testimony to theattractiveness of the asset class. While convertible securities
do have fixed-income characteristics and are impacted byrising interest rates, the price movement of their underlying

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INSIGHTS & PERSPECTIVESSPECIALTY FIXED INCOME | CONVERTIBLESIMPORTANT DISCLOSURE
Availability of this document and products and services provided by MacKay Shields LLC may be limited by applicable laws and regulations in certain jurisdictions
and this document is provided only for persons to whom this document and the products and services of MacKay Shields LLC may otherwise lawfully be issued or
made available. None of the products and services provided by MacKay Shields LLC are offered to any person in any jurisdiction where such offering would becontrary to local law or regulation. This document is provided for information purposes only. It does not constitute investment or tax advice and should not be
construed as an offer to buy securities. The contents of this document have not been reviewed by any regulatory authority in any jurisdiction.
This material contains the opinions of certain professionals but not necessarily those of MacKay Shields LLC. The opinions expressed herein are subject to change
without notice. This material is distributed for informational purposes only. Forecasts, estimates, and opinions contained herein should not be considered as
investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources
believed to be reliable, but not guaranteed. Any forward-looking statements speak only as of the date they are made and MacKay Shields assumes no duty anddoes not undertake to update forward-looking statements. No part of this document may be reproduced in any form, or referred to in any other publication, without
express written permission of MacKay Shields LLC. ©2023, MacKay Shields LLC. All Rights Reserved.
NOTE TO UK AND EUROPEAN INVESTORSThis document is intended only for the use of professional investors as defined in the Alternative Investment Fund Manager’s Directive and/or the UK Financial
Conduct Authority’s Conduct of Business Sourcebook. To the extent this document has been issued in the United Kingdom, it has been issued by MacKay Shields
UK LLP, 80 Coleman Street, London, UK EC2R 5BJ, which is authorised and regulated by the UK Financial Conduct Authority. To the extent this document has
been issued in the EEA, it has been issued by MacKay Shields Europe Investment Management Limited, Hamilton House, 28 Fitzwilliam Place, Dublin 2 Ireland,
which is authorised and regulated by the Central Bank of Ireland.
NOTE TO CANADIAN INVESTORSThe information in these materials is not an offer to sell securities or a solicitation of an offer to buy securities in any jurisdiction of Canada. In Canada, any offer
or sale of securities or the provision of any advisory or investment fund manager services will be made only in accordance with applicable Canadian securities
laws. More specifically, any offer or sale of securities will be made in accordance with applicable exemptions to dealer and investment fund manager registration
requirements, as well as under an exemption from the requirement to file a prospectus, and any advice given on securities will be made in reliance on applicable
exemptions to adviser registration requirements.
Past performance is not indicative of future results.
COMPARISONS TO AN INDEX
Comparisons to a financial index are provided for illustrative purposes only. Comparisons to an index are subject to limitations because portfolio holdings, volatility
and other portfolio characteristics may differ materially from the index. Unlike an index, portfolios are actively managed and may also include derivatives. Thereis no guarantee that any of the securities in an index are contained in any managed portfolio. The performance of an index may assume reinvestment of dividends
and income, or follow other index-specific methodologies and criteria, but does not reflect the impact of fees, applicable taxes or trading costs which, unlike anindex, may reduce the returns of a managed portfolio. Investors cannot invest in an index. Because of these differences, the performance of an index should not
be relied upon as an accurate measure of comparison.
USE OF ISSUER NAMESAll security, issuer and company names cited herein are done so for informational purposes only. The securities, issuers and companies cited herein are
educational in nature, provided for illustrative purposes only and are only intended to illustrate the portfolio management team's investment process anddiscipline. Such names are not intended, nor should they be construed as, a recommendation to buy and sell any individual security nor as an indication of current
or future profitability. Issuers cited herein do not necessarily represent portfolio positions of MacKay Shields or its affiliates, nor does the firm express any views,
positive or negative, on such issuers.
DEFINITIONSStandard Deviation is a statistical measure of portfolio risk. Standard Deviation is equal to the square root of the Variance. It reflects the average deviation of theobservations from their sample mean. In the case of portfolio performance, the Standard Deviation describes the average deviation of the portfolio returns fromthe mean portfolio return over a certain period of time. Standard Deviation measures how wide this range of returns typically is. The wider the typical range ofreturns, the higher the Standard Deviation of returns, and the higher the portfolio risk. If returns are normally distributed (i.e., has a bell shaped curve distribution),then approximately 2/3 of the returns would occur within plus or minus one Standard Deviation from the sample mean.
A drawdown is defined as the percentage of decline in the value of a security over a period before it bounces back to the original value or beyond. It is expressedas the difference between the highest, i.e., the peak value of that asset, and the lowest, i.e., the trough value of the same. Calculating the drawdown value helps
investors identify the risks associated with a particular investment and accordingly prepare themselves to manage it.
ABOUT RISK
Convertible securities are subject to a risk of loss. Convertible securities may be subordinate to other securities. The total return for a convertible security depends,
in part, upon the performance of the underlying stock into which it can be converted. Additionally, an issuer may encounter financial difficulties which could affectits ability to make interest and principal payments. If an issuer stops making interest and/or principal payments, an investor could lose its entire investment.
SOURCE INFORMATION
Source: ICE Data Indices, LLC (“ICE Data”), is used with permission. ICE® is a registered trademark of ICE Data or its affiliates, and BofA® is a registered trademarkof bank of america corporation licensed by bank of america corporation and its affiliates (“BofA”) and may not be used without BofA’s prior written approval. ICE
Data, its affiliates and their respective third party suppliers disclaim any and all warranties and representations, express and/or implied, including any warranties
of merchantability or fitness for a particular purpose or use, including the indices, index data and any data included in, related to, or derived therefrom. Neither
ICE Data, its affiliates nor their respective third party suppliers shall be subject to any damages or liability with respect to the adequacy, accuracy, timeliness orcompleteness of the indices or the index data or any component thereof, and the indices and index data and all components thereof are provided on an “as is”
basis and your use is at your own risk. Ice data, its affiliates and their respective third party suppliers do not sponsor, endorse, or recommend MacKay shields
LLC, or any of its products or services.
The following indices may be referred to in this document:
The ICE BofA All U.S. Convertibles Index is an unmanaged index that consists of convertible bonds traded in the U.S. dollar denominated investment grade andnon-investment grade convertible securities sold into the U.S. market and publicly traded in the United States. The Index constituents are market value weighted
based on the convertible securities prices and outstanding shares, and the underlying index is rebalanced daily.
The S&P 500 Index is an unmanaged index that is widely regarded as the standard for measuring large-cap U.S. stock market performance.

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INSIGHTS & PERSPECTIVESSPECIALTY FIXED INCOME | CONVERTIBLES“New York Life Investments” is both a service mark, and the common trade name, of certain investment advisors affiliated with New York Life Insurance
Company.
CORRELATION TABLE DISCLOSURE
Convertible securities are represented by the ICE BofA All Convertible Securities Index, an unmanaged market capitalization weighted index of domestic corporate
convertible securities that are convertible to common stock only. Large-capitalization stocks are represented by the S&P 500® Index, an unmanaged index thatis widely regarded as the standard for measuring large-cap U.S. stock market performance. Mid-capitalization stocks are represented by the Russell Midcap®
Index, an unmanaged index that measures the performance of the 800 smallest companies in the Russell 1000® Index. Small-capitalization stocks are
represented by Russell 2000® Index, an unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000® Index. LongTerm Treasury Bonds are represented by the Bloomberg Long-Term Treasury Index includes all public obligations of the U.S. Treasury, excluding flower bonds andforeign-targeted issues with maturates of 10 years or longer. Intermediate-Term Treasury Bonds are represented by the Bloomberg Intermediate Treasury Index
includes treasury bonds with maturates of at least one year and up to 10 years with an outstanding par value of at least 100 million. They include fixed-rate debt
issues, rated investment grade or higher by Moody's Investor Services, Standard & Poor's Corporation, or Fitch Investors Service (in that order). Treasuries include
all public obligations of the U.S. Treasury, excluding flower bonds and foreign-targeted issues. Long-Term Corporate Bonds are represented by the Bloomberg
Long-Term Credit Index which serves as a measure of all public-issued nonconvertible investment-grade corporate debts that have a maturity of 10 years or more.
Intermediate-Term Corporate Bonds are represented by the Bloomberg Intermediate Credit Index which serves as a measure of all public issued nonconvertible
investment-grade corporate debts that have a maturity of one to three years. Results assume reinvestment of all capital gain and dividend distributions. An
investment cannot be made directly into an index. Correlation is a statistical measure of how two securities move in relation to each other. Correlations are usedin advanced portfolio management.
HYPOTHETICAL PERFORMANCE DISCLOSURESThe hypothetical returns shown do not represent the returns of any client portfolio or strategy actually managed by MacKay shields and should not be construed
as such. Therefore, they are not necessarily indicative of investment skill.
This material contains hypothetical analysis based on the stated indices. The returns identified in the Efficient Frontier analysis reflect a backward looking analysisof the returns for each of the indices stated, for the identified time periods. MacKay Shields makes no representations that the Efficient Frontier analysis provided
will actually reflect future results or that any investment will actually achieve results similar to those shown. These techniques do not predict future actual
performance and are limited by assumptions that future market events will behave similarly to historical time periods or theoretical models. Moreover, the returns
shown reflect returns of the blended indices; MacKay Shields' portfolios are actively managed.
No representation is being made that any account, product or strategy will or is likely to achieve profits, losses or results similar to those shown. Hypothetical
performance results have several inherent limitations. Unlike an actual performance record, hypothetical results do not represent actual performance and are
generally prepared with the benefit of hindsight. There may be sharp differences between hypothetical performance results and the actual results subsequently
achieved by any particular account, product or strategy. In addition hypothetical results cannot account for the impact of certain market risks such as lack ofliquidity. There are numerous other factors related to the markets in general or the implementation of any specific investment strategy, which cannot be fully
accounted for in the preparation of hypothetical results and all of which can adversely affect actual results.
Information presented should not be considered predictive of future transactions or commitments made by MacKay Shields LLC nor as an indication of current or
future profitability. No representation or warranty is made as to the reasonableness of the assumptions made or that all assumptions used have been stated.
There is no representation being made that the same or similar investments would have been made on behalf of any actual client, and therefore no representation
is being made by MacKay Shields that the hypothetical portfolios identified were or would be profitable or that the associated characteristics of such hypothetical
portfolio described herein would reflect that of any actual portfolio.
The identified returns are for illustrative purposes only and are neither a prediction nor a projection of return. The return assumptions are an estimate of what
investments may earn over a stated period. Actual returns may be higher or lower than those shown and may vary substantially.
Results shown may not be attained and should not be construed as the only possibilities that exist. Different weightings in the asset allocation illustration willproduce different results. Actual results will vary and are subject to change with market conditions. There is no guarantee that results will be achieved. No fees
or expenses were included in the hypothetical results; actual portfolios would be subject to fees and expenses. Gross-of-fee performance figures presented do
not reflect the deduction of investment advisory fees. A client's returns will be reduced by the advisory fee and other expenses incurred in the management of its
account. For example, the deduction of a 1% advisory fee over a 10-year period would reduce a 10% gross return to an 8.9% net return. The scenarios assume aset of assumptions that may, individually or collectively, not develop over time. The analysis reflected in this information is based upon data at time of analysis.
This material should not be considered as investment advice nor a recommendation of any particular security, strategy or investment product.
No representation is made as to the accuracy and completeness of information contained in this presentation that has been obtained from third parties.
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