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CIHEX: Steady as We Go
January 2, 2025
Eli Pars, CFA
- In a quarter that delivered dramatic ups and downs, the strong asymmetry of Calamos Hedged Equity Fund’s core 65/35 option trade allowed us to capture meaningful equity upside while avoiding the brunt of equity market downside.
- Consistent with our active, flexible approach, we are always on the lookout to make incremental adjustments, but as we believe our current hedge remains extremely compelling, our primary focus is on locking in this profile.
- We believe CIHEX’s historical steadiness is the result of our active management and commitment to positioning the fund for a range of market outcomes.
Learn more about the three pillars of CIHEX.
- Seasoned options expertise
- Track record of downside risk mitigation
- Seeks to avoid sacrificing upside participation
Webinar Replay
Calamos Hedged Equity Fund is designed to serve as an equity alternative that seeks upside participation in the equity market while limiting exposure to drawdowns. During the quarter, we believe CIHEX delivered this goal, advancing during a turbulent quarter shaped by renewed anxiety about the Fed’s interest rate cuts, inflation and amplified pressure on tech stocks.
As we have discussed, our hedge is structured to position the fund for as many outcomes as possible because we know it is impossible to predict the future with certainty. This view continues to ring true in today’s market environment.
Happy with Our Hedge
In the second half of 2023, we put the core of our book in a trade structured to pursue 65% of the market’s upside, with only 35% of the market’s downside at its expiration in December 2025. (For more on this trade, see our post from January of 2024, “Focused on Capitalizing on—Not Capping—Equity Upside.”) The core of our book remains in this trade.
We continue to believe the 65/35 profile is a unique opportunity that fits well for our core investors and this year is a great example of its value. Strong “up” years in the equity market can be challenging for defensively positioned hedged strategies, but because we can lean on the strong asymmetry of our current profile, we captured a meaningful amount of that upside for our investors.
As active managers, we continue to look for opportunities to make incremental adjustments to this hedge and capitalize on short-term volatility as the markets move up and down. However, because we believe the 65/35 profile is such a good fit for our investors, we continue to focus more on locking this profile in going forward than making active adjustments to the hedge.
The past year has delivered many unpredictable twists and turns, and equity market participants were often caught off guard. We expect more of the same in 2025 and believe CIHEX’s flexible approach and the freedom to make ongoing adjustments to our hedge—when circumstances warrant—will continue to set us apart to the benefit of CIHEX’s shareholders.
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 3/1/2024 is 0.92% 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.
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 1-866-363-9219. Read it carefully before investing.
Diversification and asset allocation do not guarantee a profit or protect against a loss. Alternative strategies entail added risks and may not be appropriate for all investors. Indexes are unmanaged, are not available for direct investment, and do not include fees and expenses.
Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. The views and strategies described may not be appropriate for all investors. References to specific securities, asset classes, and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.
Indexes are unmanaged, do not include fees or expenses and are not available for direct investment. The S&P 500 Index is considered a measure of the US equity market. The Bloomberg US Aggregate Index measures the performance of investment-grade bonds. The Bloomberg US Government/Credit Bond Index includes Treasuries and agencies that represent the government portion of the index, and includes publicly issued US corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements to represent credit interests.
The Morningstar Options Trading Category is comprised of funds that use a variety of options trades, including put writing, options spreads, options-based hedged equity, and collar strategies, among others.
Important Risk Information. An investment in the Fund(s) is subject to risks, and you could lose money on your investment in the Fund(s). There can be no assurance that the Fund(s) will achieve its investment objective. Your investment in the Fund(s) is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund(s) can increase during times of significant market volatility. The Fund(s) also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund’s prospectus.
The principal risks of investing the Calamos Hedged Equity Fund include covered call writing risk, options risk (see definition below), equity securities risk, correlation risk, mid-sized company risk, interest rate risk, credit risk, liquidity risk, portfolio turnover risk, portfolio selection risk, foreign securities risk, American depository receipts, and REITs risks.
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