First published: February 13, 2020
The 2020s appear to be continuing a pattern that started last decade—with a pronounced investor preference for bond funds. That was true last year and in the first quarter of 2021, the net investment in bond funds more than doubled what was invested in U.S. and international stock mutual funds and exchange-traded funds (ETFs).
Ten years ago, this may have made sense: Bonds offered the promise of a safe haven to aging and risk-averse investors, and the decade was distinguished for its ever-declining interest rates.
That was then, and this is now. Now rates have risen and inflation (even if "transitory") is a reality. In April the Consumer Price Index increased 4.2%, the fastest since September 2008. The monthly gain in core inflation was the largest since 1981.
Fortunately, there's an idea for your clients that's appropriate for this environment: Calamos Market Neutral Income Fund (CMNIX). CMNIX has delivered a bond-like return with a bond-like standard deviation but without the bond-like risk exposures. And over the past 10 years, CMNIX has done this with a low to negative correlation to bonds.
To be certain, there’s a case to be made for actively managed fixed income (see Calamos funds). But can you see the potential benefit to adding CMNIX as a means of improving risk-adjusted returns through diversification? To learn more, please talk to a Calamos Investment Consultant at 888-571-2567 or email@example.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.
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.
FTSE 30-Day T-Bill Index is generally considered representative of the performance of short-term money market instruments.
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.
Morningstar Market Neutral Category represent funds that attempt to eliminate the risks of the market by holding 50% of assets in long positions in stocks and 50% of assets in short positions.
S&P 500 Index is generally considered representative of the U.S. stock market.
Morningstar ratings shown are for load-waived shares that do not include any front-end sales load. Not all investors have access to or may invest in the load-waived share class shown. Other share classes with front-end or back-end sales charges may have different ratings than the ratings shown. Additionally, some I-share mutual funds for which Morningstar calculates a load-waived I-share star rating may not waive their front-end sales load. Source: Morningstar Direct. Morningstar overall rating among 91 Market Neutral Funds: The fund’s risk-adjusted returns based on load-waived Class I shares had 3 stars for 3 years, 4 stars for 5 years, and 5 stars for 10 years out of 91, 76 and 23 Market Neutral Funds, respectively, for the period ended 3/31/21.