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CIHEX: The Power of Asymmetry
April 3, 2025
Learn more about the three pillars of CIHEX.
- Seasoned options expertise
- Track record of downside risk mitigation
- Seeks to avoid sacrificing upside participation
Key Points:
- In a quarter that saw the S&P 500 down more than 10% peak to trough at one point, Calamos Hedged Equity Fund demonstrated defensive strength by only declining about half as much as the broader market, which we believe showcases the effectiveness of our asymmetric hedge structure.
- We believe the fund’s core 65% up / 35% down option trade continued to provide shareholders with an attractive balance of upside participation while significantly limiting downside exposure, which proved particularly valuable during the first quarter’s challenging environment.
- Recent volatility created opportunities for us to implement tactical option trades on the margin, which in our view enhances our strategy without materially altering its fundamental risk/reward profile.
- We believe CIHEX’s historical resilience during market stress reinforces the value of our active management approach and our commitment to positioning the fund for a range of market outcomes.
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 first quarter of 2025, CIHEX demonstrated this value proposition when the broader S&P 500 declined approximately 4% while the fund experienced only half of that drawdown. In our view, this outperformance during market stress highlights the effectiveness of our hedging strategy in preserving capital when it matters most.
The pronounced volatility of the first quarter was driven by a confluence of factors: persistent inflation concerns, the implementation of new tariff policies, ongoing geopolitical tensions, and a significant rotation away from technology stocks. In our view, this market environment—characterized by rapid sentiment shifts and sector volatility—created precisely the conditions where our asymmetric hedging strategy demonstrates its full value to investors.
As we have consistently emphasized, 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. The market volatility we’ve witnessed in early 2025 has only reinforced the validity of this approach.
Capitalizing on Our Asymmetric Profile
In late 2023, we positioned the core of our book in a trade structured to pursue 65% of the market’s upside, while attempting to limit exposure to only 35% of the market’s downside. The current trade takes us through to December 2025 and still looks very close to our original payoff in 2023. The foundation of our book remains anchored in this attractive trade, which has provided precisely the kind of downside risk mitigation we seek during this recent period of market weakness.
The asymmetric profile of our current hedge has allowed the fund to outperform during Q1’s challenging environment, providing meaningful protection against equity market declines. This performance pattern is exactly why we believe investors choose CIHEX as part of their portfolio—to maintain equity market exposure while significantly reducing downside risk.
Tactical Opportunities in Volatility
As active managers, we’ve capitalized on the increased market volatility in Q1 2025 by implementing selective option trades around the edges of our primary position. These tactical adjustments have allowed us to extract additional value from market movements without compromising our fundamental risk/reward profile. The ability to make these incremental adjustments in response to changing market conditions is a key advantage of our actively managed approach.
Nevertheless, because we believe the 65/35 profile remains an optimal fit for the fund in the current environment, our primary focus is to maintain this favorable asymmetry rather than making substantial changes to our hedge structure.
Looking Ahead
The start of 2025 has already delivered significant market volatility, and we anticipate more unpredictable twists and turns as the year progresses. In this uncertain environment, CIHEX’s flexible approach and our ability to make tactical adjustments when opportunities arise will continue to set us apart.
We believe the fund’s performance in the first quarter exemplifies why investors choose CIHEX—to participate in the equity markets with the potential for substantially less risk. As we navigate the remainder of 2025, we remain confident that our strategy can continue to deliver on its central thesis: pursuing meaningful upside participation with significantly limited 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.
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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