Once Again in 2025, CIHEX Performed as Designed

Jason Hill

Summary Points:

• Calamos Hedged Equity Fund seeks to participate in equity market appreciation while limiting exposure to drawdowns.
• During the fourth quarter, the fund captured approximately 65% of the S&P 500’s upside while maintaining the asymmetric hedge structure that defines our approach.
• Validating the effectiveness of our framework, CIHEX returned 11.4% for the year, representing approximately 64% of the S&P 500’s upside while maintaining downside risk management.
• We made strategic adjustments during the quarter, repositioning our hedge strikes higher to maintain optimal protection levels as markets advanced.
• Despite equity markets reaching new highs with compressed volatility, multiple catalysts exist that could drive increased market volatility in 2026.

Executing Through Another Strong Year in Equity Markets

Calamos Hedged Equity Fund is designed as an equity alternative that seeks to participate in market appreciation while limiting exposure to significant drawdowns. During the fourth quarter, CIHEX earned 1.73%, capturing approximately 65% of the S&P 500 Index’s 2.65% gain. For the full year, the fund delivered 11.4% versus the index’s 17.9% advance—representing 64% upside participation while limiting downside risk.

We believe CIHEX’s annual result demonstrates the durability of our approach across varying market conditions. The fund delivered positive equity returns while maintaining downside risk management—precisely the value proposition investors seek from hedged equity strategies.

Strategic Positioning: Taking What the Market Gives Us

Our current hedge framework delivers approximately 65% upside participation with 35% downside exposure—a structure we believe represents an attractive balance for investors seeking equity exposure with integrated risk management. However, it’s important to understand that this specific ratio is not our mandate; attaining the most attractive payoff available to us is. But not at any cost.

The 65/35 profile reflects what the current options market, driven by prevailing volatility levels and interest rates, makes available to us at reasonable cost. These conditions may not persist indefinitely. Market dynamics evolve, implied volatility shifts, and rate environments change—all of which impact the economics of hedge structures. We believe our responsibility is to construct the most effective asymmetric profile given current market conditions, not to rigidly maintain a specific participation ratio regardless of cost or efficiency. We remain flexible and opportunistic, prepared to adjust this structure if market conditions shift in ways that would make alternative hedge profiles more attractive from a risk-reward perspective.

During the fourth quarter, we repositioned our hedge strikes higher to reflect market appreciation while maintaining this overall framework. Additionally, we implemented modest tactical adjustments at the margins through spread structures, though these refinements did not materially alter our core positioning.

Managing Through Potential Elevated Valuations and Multiple Uncertainty Factors

Although volatility remained compressed throughout 2025, several factors could drive increased market volatility ahead:

• AI infrastructure investment: Massive capital expenditures directed toward AI face ongoing scrutiny regarding sustainability and return on investment.
• Trade and policy dynamics: Evolving discussions around tariffs, trade relationships, and regulatory frameworks create uncertainty for corporate earnings trajectories.
• Monetary policy trajectory: Federal Reserve rate path implications for economic growth, valuations, and market liquidity remain central considerations.
• Geopolitical considerations: International tensions and political developments add layers of uncertainty to the outlook for both growth and market stability.

Our risk-managed approach doesn’t require predicting when volatility will emerge—it seeks to ensure the fund is positioned appropriately when it does.

2025 Performance Validates the Hedged Equity Value Proposition

CIHEX’s 11.4% return captured meaningful upside from the S&P 500’s strong performance while minimizing downside risk throughout a year characterized by elevated valuations and multiple sources of uncertainty.

The 64% upside participation reflects both our hedge positioning and the cost of maintaining protection in an environment where volatility remained subdued. In years when markets advance steadily without significant drawdowns, hedged equity strategies naturally capture a portion rather than the entirety of gains. This trade-off represents the core value proposition: accepting somewhat reduced upside in strong markets in exchange for limited downside when markets face stress.

We believe this profile continues to serve investors seeking equity exposure with reduced risk—particularly given current market valuations, concentrated index composition, and multiple potential volatility catalysts ahead.

Looking Ahead to 2026

As we enter 2026, our positioning balances opportunity and risk—as it always does. We believe the strategic adjustments we implemented during the fourth quarter ensure our hedge levels remain relevant given current market levels, while our asymmetric framework preserves the downside mitigation that defines CIHEX.

Whether markets extend their advance, consolidate recent gains, or experience volatility corrections, we believe the fund remains well-positioned to deliver on its mandate: pursuing equity market participation with meaningfully reduced downside exposure.

Most importantly, CIHEX continues to offer what we believe is a compelling alternative for investors who want equity market exposure but seek to avoid the full downside participation that comes with traditional long-only strategies. In an environment where questions persist about the sustainability of current trends and valuations, this balance between participation and downside risk management may prove increasingly valuable.

We remain committed to our disciplined approach—constructing the most effective hedge structure available in current market conditions while maintaining flexibility to adjust as those conditions evolve.

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.