Calamos Convertible Portfolio Positioning
Throughout 2004, we remained constructive on the strength of the underlying economy and positioned our convertible portfolios to benefit from investors recognition of the recovery--an event that was seemingly postponed by election politics. While maintaining better overall credit quality than the broad convertible indexes, we entered the year with exposure to riskier (but not speculative) assets. While we participated in the markets bounce early in the year, our avoidance of the most distressed arenas and individual securities kept us from fully capturing this market upswing. Such performance is typical for us, as we strive to capture much of the markets upside participation but with a keen focus on limiting the downside, as we believe this will serve our clients over the full course of a market cycle.
Over the years that we have been managing convertible portfolios, we have found that the management of the riskreward relationship is essential to providing clients with consistent acceptable long term results. Our results through market cycles have demonstrated the value of this approach. Most notably this was demonstrated by preserving investors capital through the difficult markets of 2000-2002. We strive to manage credit quality through a market cycle in order to maintain proper risk/reward (upside potential versus downside risk), regardless of how speculative the overall convertible market may be at times. Throughout the market cycle, a portfolio may at times reflect the benchmark, and sometimes in our opinion, it should not. Managing the overall risk of the portfolio is essential to achieving the objective of high returns at a manageable risk level.
This positioning demonstrated its benefits by year end, as our steady approach outperformed the most speculative portion of the market during much of the rest of the year, resulting in solid overall performance with an attractive risk/reward profile. Now that the market has more clearly entered a more stable growth phase, we are adjusting the portfolios to favor less cyclical namescompanies with higher-quality balance sheets and more stable free-cash-flow generators. As always, such portfolio adjustments remain tied to our focus on delivering the proper balance of risk and reward to our long-term investors.
Performance quoted represents past performance which is no guarantee of future results. Current performance may be lower or higher than the performance quoted.
Please remember that one cannot invest directly in any index.
This report has been prepared by Calamos Advisors LLC for informational purposes; any opinions expressed herein reflect our judgment as of this date and are subject to change. The forecast may not prove true.
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Calamos Advisors LLC
2020 Calamos Court
Naperville, IL 60563-2787
Attn: Compliance Officer
2056 Rev 2-05