Barron’s Profiles How CMNIX Uses Volatility to Generate Returns
October 25, 2018
Investments have their believers and their nonbelievers. A recent Barron’s profile presents Calamos’ Eli Pars as a portfolio manager who doesn’t have to commit to either camp.
Pars is Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-Portfolio Manager of Calamos Market Neutral Income Fund (CMNIX) along with Co-PMs Jason Hill and David O’Donohue.
As explained in the October 15 profile punctuated with examples of various holdings, Pars leads the fund’s use of volatility to generate returns while managing risk:
“To achieve market neutrality, the fund takes a short position in a [convertible securities issuer’s] stock equal to the bond’s sensitivity to fluctuations in the stock price…If the stock price goes up, the fund loses money on its short positions but makes money on the convertible bonds, which appreciate in value. On the other hand, if the stock price goes down, the fund makes money on its short positions.”
In other words, “I don’t care, theoretically, whether the stock goes up or down,” says Pars, adding that the opportunity to profit is in the volatility.
Read the full interview here. Advisors, for more about CMNIX, see this on-demand video explainer or contact your Calamos Investment Consultant at 888-571-2567 or firstname.lastname@example.org.
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The principal risks of investing in the Calamos Market Neutral Income Fund include: equity securities risk consisting of market prices declining in general, convertible securities risk consisting of the potential for a decline in value during periods of rising interest rates and the risk of the borrower to miss payments, synthetic convertible instruments risk, convertible hedging risk, covered call writing risk, options risk, short sale risk, interest rate risk, credit risk, high yield risk, liquidity risk, portfolio selection risk, and portfolio turnover risk.
Covered Call Writing: As the writer of a covered call option on a security, the fund foregoes, during the option’s life, the opportunity to profit from increases in the market value of the security, covering the call option above the sum of the premium and the exercise price of the call.
Convertible Securities Risk: The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also, may have an effect on the convertible security’s investment value.
Convertible Hedging Risk: If the market price of the underlying common stock increases above the conversion price on a convertible security, the price of the convertible security will increase. The fund’s increased liability on any outstanding short position would, in whole or in part, reduce this gain.
Convertible Securities Risk: The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security’s investment value.