Q: How are you positioned globally?
Global Market Overview
The first quarter was good to both equity and convertible markets around the globe, with broad market returns enerally between 4% and 6%. In many cases, U.S. equities and convertibles offered returns slightly below their foreign counterparts, supporting the argument for the long-term benefits of maintaining international exposure in a portfolio. Emerging markets outperformed the developed markets, demonstrating that additional growth opportunities remain within this more volatile part of the investing spectrum. Convertible valuations around the globe still hover below historical norms, although slight improvement during the quarter offered benefits to those allocated in that asset class. M&A activity and private equity actions are gaining acceptance around the globe, which we believe can spur greater growth as well.
Among developed countries, Europe was the regional leader, followed by the Far East and North America. Emerging markets continued their solid run, again besting the developed markets. More specifically, the Nordic countries posted some of the highest returns, while France and Germany's bourses produced double-digit gains (not accounting for currency fluctuations). While Japan, Emerging Asia and Latin America were quite strong overall, Europe, the Middle East and Africa saw more mixed results.
Outlook/Positioning
We feel that Japan and Europe both present ample opportunities, and we believe the U.S. market should continue its solid growth pattern into the near future. We are positioning assets to take advantage of the Japanese marketplace while maintaining significant exposure in Europe and the United States.
In addition, we have increased slightly our exposure to developing economies, such as Greece and South Africa. Emerging markets represent only a minor portion of our portfolios, however, as the significant opportunities they present come with significant risks.
Continuing from the end of 2005, the largest sector allocations within the portfolios are still Financials, Information Technology, Industrials and Consumer Discretionary, although the absolute allocations in those sectors have changed slightly. Overall, we are still optimistic about global economic growth and are concentrating primarily on avoiding potential risks. Long term, we are bullish on global growth, and are strong believers in the importance of investing from a global perspective. Consistent with our overall approach, investment decisions are made as a function of relative risk/reward opportunities rather than as top-down asset allocation decisions.
<< Previous | Executive Summary
Index Definitions:
1 The S&P 500 Index is an unmanaged index generally considered representative of the U.S. stock market.
2 Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization was approximately $664.9 million; the median market capitalization was approximately $539.5 million. The largest company in the index had an approximate market capitalization of $1.8 billion.
3 Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index. As of the latest reconstitution, the average market capitalization was approximately $4.7 billion; the median market capitalization was approximately $3.6 billion. The largest company in the index had an approximate market capitalization of $13.7 billion.
4 Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.
5 Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.
6 The CSFB High Yield Index is an unmanaged index of high yield debt securities.
7 The Merrill Lynch All U.S. Convertibles Index (VXA0) is comprised of approximately 500 issues of convertible bonds and preferred stock of all qualities.
8 The Merrill Lynch All Investment Grade Convertible Index (VXA1) is comprised of approximately 200 issues of only investment-grade convertible bonds and preferreds.
9 The Merrill Lynch All Speculative Grade Convertible Index (VXA2) is comprised of approximately 300 issues of only speculative-grade convertible bonds and preferreds.
Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Performance data quoted represents past performance which is no guarantee of future results. Current performance may be lower or higher than the performance quoted.
The views and opinions expressed by John P. Calamos and Nick P. Calamos are as of the date of the article, and are subject to change at any time based upon market or other conditions. The material contained herein is for informational purposes only and should not be considered investment advice.
For more information:
Calamos Advisors LLC is a federally registered investment advisor. Part II of Form ADV, which provides background information about the firm and its business practices, is available upon written request to:
CALAMOS ADVISORS LLC
2020 Calamos Court
Naperville, IL 60563-2787
Attn: Compliance Officer
2274 1Q06