Archived material may contain dated performance, risk and other information. Current performance may be lower or higher than the performance quoted in the archived material. For the most recent month-end fund performance information visit www.calamos.com. Archived material may contain dated opinions and estimates based on our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions at the time of publishing. We believed the information provided here was 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.

Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. 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. Had it been included, the Fund’s return would have been lower.

Archived on July 17, 2019

Convertible Securities Provide Well-Priced Access to Growth

John P. Calamos, Sr.


Convertible securities offer a wide range of potential benefits, thanks to their combination of stock and bond attributes. They have been less vulnerable to rising interest rates than non-convertible bonds due to their equity attributes, while their fixed income attributes can provide potential downside protection during periods of short- term stock market volatility. (For more on how convertibles work, see our guide, “Convertible Securities: Structures, Valuation, Market Environment and Asset Allocation”.)

Convertible securities can also provide a way to access growth opportunities at attractive valuations. As the chart below shows, the average valuation of the U.S. convertible universe is currently below its long-term mean and toward the bottom of what we consider to be the “fair valuation” band.

Attractive Valuations in the U.S. Convertible Market

Attractive Valuations in the U.S. Convertible Market
Valuations are not an indication of how a fund will perform. Past performance is no guarantee of future results. Source: BofA Merrill Lynch.


However, it’s important to remember:

The convertible universe is diverse. There is a good deal of variation among the valuations of individual convertibles—some are overvalued and some are undervalued. In addition to the differences in valuations, convertibles can also vary in their degree of equity and fixed income sensitivity. The characteristics of an individual convertible can change over time, as can the attributes of the convertible universe as a whole. Also, there are often meaningful valuation differences among regions. For example, over the past few years, European investment grade convertibles have had richer valuations than investment grade convertibles in the U.S. and elsewhere.

There can still be opportunities in convertibles when the “average” valuation is higher. As discussed in our white paper “The Case for Strategic Convertible Allocations,” our teams “are not looking to buy the asset class as a whole, but rather, to construct portfolios of securities most likely to deliver the specific risk/return profiles we seek.”

Active management is key. As we often say, it is not simply the inclusion of a convertible that makes a strategy work, what matters is how convertibles are managed to achieve a specific outcome. And, in an environment of economic growth and slowly rising interest rates, I believe actively managed convertible allocations can address a range of needs—from lower volatility equity participation to providing income that’s less vulnerable to duration risk.




    Past performance is no guarantee of future results. Opinions are as of the publication date, subject to change and may not come to pass. Information is for informational purposes only and shouldn’t be considered investment advice. Convertible securities entail interest rate risk and default risk.

    In the graph above, convertibles are represented by the BofA Merrill Lynch All U.S. Convertibles Index, a measure of the U.S. convertible market. Indexes are unmanaged, do not entail fees or expenses and are not available for direct investment.

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    Archived material may contain dated performance, risk and other information. Current performance may be lower or higher than the performance quoted in the archived material. For the most recent month-end performance information, please CLICK HERE. Archived material may contain dated opinions and estimates based on our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions at the time of publishing. We believed the information provided here was 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.

    Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. 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. Had it been included, the Fund’s return would have been lower. For the most recent month-end fund performance information visit www.calamos.com.