CIHEX: Capturing Upside in a Rising Market

Jason Hill

Key Points

• In a quarter when the S&P 500 Index gained 10.94%, Calamos Hedged Equity Fund returned 6.70% delivering over 60% upside participation while maintaining its asymmetric hedge protection. We believe this demonstrates the effectiveness of our structured approach.
• Our core 65% up / 35% down hedge structure continued to provide an attractive balance of upside participation and downside protection. The fund’s Q2 performance aligns with our design expectations over a one-year horizon.
• At the end of June, we opportunistically extended our hedge to June 2026 and adjusted strike levels upward—enhancing upside potential, reducing theta costs,* and preserving downside risk mitigation.
• In our view, CIHEX’s strong participation in the market’s second quarter advance reinforces the value of our active management and our ability to capture meaningful upside while maintaining a defensive posture.

Participating in a Strong Market Rebound

Calamos Hedged Equity Fund (CIHEX) is designed as an equity alternative—seeking to participate in market upside while limiting exposure to drawdowns. During the second quarter, CIHEX earned 6.70%, capturing over 60% of the S&P 500 Index’s 10.94% gain. We believe this underscores the strength of our asymmetric strategy in rising markets, as the fund advanced while still preserving the risk-mitigation characteristics that served investors well during the volatility of the first quarter.

Equity markets rebounded sharply during the second quarter, supported by resilient corporate earnings, optimism about deregulation, and continued momentum in AI innovation. This environment—marked by steady gains and reduced volatility—created favorable conditions for our strategy to demonstrate its upside participation capabilities.

Leveraging Our Asymmetric Profile

Our core hedge structure, implemented in late 2023, was designed to potentially capture approximately 65% of the market’s upside while limiting downside exposure to 35% over a one-year horizon. As the equity market advanced in the second quarter, this structure performed as intended and allowed the fund to participate in the majority of the market gains while maintaining a defensive stance.

We believe this asymmetric profile is central to why investors choose CIHEX: to maintain meaningful equity exposure across diverse market environments, with a disciplined approach to risk management.

Strategic Hedge Enhancement

As active managers, we took advantage of favorable market conditions at the end of June to roll our hedge out to June 2026 and adjust strike levels upward. This tactical move:

• Enhances upside participation potential for the coming year
• Reduces the cost of theta bleed (i.e., increased option value decline as expiration approaches), and
• Preserves our commitment to downside risk mitigation.

Importantly, this adjustment is also designed to preserve our core 65% upside / 35% downside risk-reward profile, ensuring continuity in our strategic positioning. This strategic adjustment reflects our ability to respond dynamically to market opportunities while maintaining the integrity of our risk-managed framework.

Looking Ahead

The first half of 2025 has delivered both significant volatility and meaningful market gains—highlighting the importance of maintaining a balanced, flexible approach. We believe CIHEX’s performance across both Q1’s challenges and Q2’s strength exemplifies our strategy’s value: capturing upside while limiting downside.

As we move into the second half of the year, our enhanced hedge positioning and active management approach position the fund to continue delivering on its core objective—pursuing meaningful equity market participation with significantly reduced downside exposure.

CIHEX: A Time-Tested Active Approach to Capturing Upside, While Managing Downside Volatility

Source: Morningstar. Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. Please refer to Important Risk Information. The principal value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance reflected at NAV does not include the Fund’s maximum front-end sales load of 4.75%. Had it been included, the Fund’s return would have been lower. The fund’s gross expense ratio as of the prospectus dated 2/28/2025 is 0.90% for Class I shares.

Average annual total return measures net investment income and capital gain or loss from portfolio investments as an annualized average. All performance shown assumes reinvestment of dividends and capital gains distributions.