Financial Times, fund management"FTfm" June 5, 2009
In his feature appearance in "FTfm," John P. Calamos, Sr. provided an overview of the tremendous convertible valuation gap seen in the end of 2008. He said valuations gaps continue to close, but opportunity remains as the convertible valuation gap "is still very wide at 6% and still well below what we've seen in past markets."
John serves as chairman, chief executive officer and co-chief investment officer of Calamos Investments. The firm has invested in convertible securities for more than 30 years and also specializes in growth-oriented equities.
He commented that convertibles offer investors the opportunity to be in the equity markets and capture equity upside potential, with the downside protection of a convertibles' fixed-income components; helping avoid a market timing decisions. He explained that convertibles performed poorly in the later part of 2008, because hedge funds over levered the strategy and were forced to sell in a very difficult market.
John reminded investors that we're not going to see headlines foretelling that markets are going back up to bull market levels of previous years. "We're seeing good opportunities in convertibles [. . . and] in growth stocks in here. High yield papers had a terrific opportunistic market." Calamos is staying in the markets defensively and ready for market upside participation.
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Once on the FTfm site, scroll down and click the video link, 'June 5: John Calamos on why he loves convertibles'.
Information about Risk
Please note that the convertible valuation gap data derived from Calamos Corporate Systems (CCS), a proprietary valuation system designed and maintained solely by Calamos. While we deem the information contained in the chart to be reliable, Calamos makes no public claims as to the validity of the information derived from the system. As of May 31, 2009 the convertible market was 6.6% cheaper than the Calamos valuation.
In addition to market risk, there are certain other risks associated with an investment in a convertible bond, such as default risk, the risk that the company issuing debt securities will be unable to repay principal and interest, and interest rate risk, the risk that the security may decrease in value if interest rates increase.
High-yield bonds are lower-rated securities, which present greater risks than investments in higher-rated securities. This is because there is a greater likelihood that the company issuing the lower-rated securities may default on income and principal payments.
The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only should not be considered investment advice.
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