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Even During the Bull Market for Bonds, Our Income Alt Provided More Than Enough for 30+ Years of Retirement

As an income alternative, Calamos Market Neutral Income Fund (CMNIX) belongs in the discussion of potential solutions for funding a client’s retirement. In a market environment that could turn increasingly volatile for both stocks and bonds, investors may wish to reduce equity sensitivity without embracing the interest rate sensitivity of the bond market. CMNIX has historically provided bond-like returns with bond-like risk without bond-like interest-rate sensitivity.

Of course, the litmus test for any retirement solution is how it holds up as it’s drawn down over the years. Assuming an annual withdrawal rate of 4%, the following hypothetical illustration shows how CMNIX could help fund a decades-long retirement—and outperform an index-based account while doing so.

As shown below, over the almost 30-year period since inception of the fund’s Class A shares, a $500,000 investment in the portfolio would have been able to sustain a 4% withdrawal rate and complete the period with more than $1 million remaining. In other words, the initial investment more than doubled, with the portfolio providing an annualized total return of 6.96%, including the impact of the withdrawals. Note that this performance takes place over what was a 30-year bull market for bonds.

As illustrated in the chart here, the ending value of an initial $500,000 investment in CMNIX was $1,033,270—even after total distributions of $904,399 over the 30-year time period—while the index-based account’s value ended up at just $899,412. Here’s a summary of the results:

START DATE: 09/04/1990
END DATE: 06/30/2019
INITIAL INVESTMENT: $500,000
INFLATION RATE: 3%
WITHDRAWAL RATE: 4%
TOTAL WITHDRAWALS: $904,399
ENDING VALUE:
PORTFOLIO: $1,033,270
INDEX: $899,412

hypothetical market value of initial $500,000 investment

Advisors, learn more about CMNIX’s role as an income alternative by contacting your Calamos Investment Consultant at 888-571-2567 or caminfo@calamos.com.

Before investing carefully consider the fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-800-582-6959. Read it carefully before investing.

Click here to view standardized performance.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

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.

Alternative investments are not suitable for all investors.

The S&P 500 Index is generally considered representative of the U.S. stock market.

The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market of SEC-registered securities. The index includes bonds from the Treasury, Government-Related, Corporate, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS sectors.

Bloomberg Barclays U.S. Government/Credit Index comprises long-term government and investment grade corporate debt securities and is generally considered representative of the performance of the broad U.S. bond market. Unlike convertible bonds, U.S. Treasury bills are backed by the full faith and credit of the U.S. government and offer a guarantee as to the timely repayment of principal and interest.

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