Global Convertibles: Strength in 2025, Optimism for 2026

Eli Pars, CFA

Summary Points:

• The global convertible market closed out a strong year with a modest fourth quarter advance, returning 23.3% and 1.6%, respectively, as measured by the FTSE Global Convertible Index.
• Calamos Global Convertible Fund (CXGCX) gained 19.53% for 2025, marking its second strongest year, following a gain of 39% in 2020.
• Although the fund’s advance was certainly strong in absolute terms, our focus on maintaining a balanced risk-reward profile, along with some mean reversion in our selection, precluded the fund from capturing the full measure of the market’s upside for both the quarter and the year.
• Global issuance of $166.5 billion was extremely robust, nearly matching 2001’s record issuance of $166.7 billion.

As we have discussed in our past commentaries, convertible securities vary in their levels of equity and fixed-income sensitivity. The most equity-sensitive convertibles offer higher levels of upside but also greater exposure to downside. In contrast, more pronounced fixed income characteristics provide a greater cushion against downside in exchange for less upside opportunity. In Calamos Global Convertible Fund, our goal is lower-volatility participation in the global equity market over the long term. We position the portfolio with the aim of capturing the majority of equity upside while still maintaining downside resilience. This risk-management philosophy, combined with our bottom-up security approach, led to a strong return in absolute terms for the year, which also captured most of the global convertible market’s advance.

Although the fund trailed the index a bit during 2025, we believe our dual focus on achieving returns and mitigating risk will serve the fund well. As we look to 2026, we see reason for optimism, supported by tailwinds that can sustain economic growth: short-term rates are more likely to move lower than higher, and the AI data center buildout is unleashing a global construction boom. However, we believe it pays to be prudent. Although many countries and companies have weathered tariffs, we expect them to remain a wild card; they’ve never been used in our modern global economy as they are today. And, as we’ve seen, geopolitics can add plenty of curveballs.

Despite slowing a bit in the fourth quarter, 2025’s global convertible issuance was one of the largest on record. For the quarter, US companies led with $11.4 billion, followed by Europe ($481 million), and Asia ($453 million). Global issuance for the year totaled $166.5 billion, falling just short of 2001’s record $166.7 billion. For the year, US companies once again led, with $118.8 billion, followed by Asia at $31.6 billion, Europe at $14.2 billion, and Japan at $1.9 billion.

Led by US Companies, Global Convertible Issuance Surged in 2025 ($ bil)

Source: BofA Global Research as of 12/31/25

Although it remains to be seen whether new issuance in 2026 will match 2025, we expect that the new issuance will remain healthy in the coming year, providing us with numerous opportunities to participate in growth upside with reduced exposure to downside risk. As we have discussed, the convertible market is dynamic, both regionally and on a sector basis. It ebbs and flows based on what types of companies need to raise capital. We are going through one of those transitions, as shown in the table below. The US now represents nearly 65% of the global convertible market, and over 70% of new issuance in 2025 was from US companies. Led by Chinese companies, Asia ex-Japan is an increasingly large player, representing 19% of 2025’s new issuance market, followed by Europe at 12%.

The Global Convertible Market Ebbs and Flows: Pre-Covid vs Current

Source: Calamos Investments.

Positioning

While we have remained active, we have not dramatically changed the funds’ overall weightings over recent quarters. We continue to overweight the consumer and China. But, as we have discussed, this is driven more by our view of the bottom-up fundamentals of select leading Chinese online retailers, rather than by a macro-based bet on the Chinese consumer.

The fund maintains its underweight to Europe. Our security selection process seeks issues with attractive structures issued by companies with compelling growth fundamentals. In recent years, we have had a difficult time finding bottom-up ideas in the European convertible market that meet our criteria; Europe’s investor base tends to favor defensive (aka low delta) structures. While these securities may not have significant downside risk, it’s challenging to make money with them. We prefer to draw on our decades of experience and proprietary research to move up the risk-reward spectrum, seeking higher growth, albeit with a bit more risk. Building exposure through synthetic convertibles has provided us with opportunities to increase our exposure to Europe, but we expect to maintain an underweight position, especially given our concerns about the tax and regulatory environment in the region. That said, the convertible market is always changing, so the European market may well rise again.

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. The funds’ gross expense ratio as of the prospectus dated 2/28/2025 is 1.10% for Class I Shares.