Plenty of Fuel Left in the Tank: Our Outlook for Convertible Market Upside

Q&A with Joe Wysocki, CFA

1. The convertible market has been on a tear this year, with the ICE BofA US All Convertibles Index returning 19.3% through October, leading equity and high yield markets.
2. Companies in some of the most exciting sectors of the economy are issuing convertibles; companies at the heart of the AI ecosystem are well represented in the surge of year-to-date issuance.
3. As investors seek to insulate their portfolios from both stock market volatility and interest rate headwinds, the hybrid structure of convertibles has historically offered a compelling proposition: equity upside participation with potential risk mitigation and less vulnerability to interest rate changes.

To find out more about what’s been driving the opportunity of convertibles, we spoke with Joe Wysocki, CFA, senior vice president and senior co-portfolio manager of Calamos Convertible Fund (CICVX). Drawing on a time-tested active approach, CICVX is up more than 22% year-to-date through October 31, 2025—well ahead of the convertible, equity, and high yield market benchmarks and peers.

Calamos Convertible Fund: Outperforming peers and market benchmarks year-to-date

Past performance is no guarantee of future results. Sources: Morningstar, Calamos. Indexes are unmanaged, do not include fees or expenses and are not available for direct investment. 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. CICVX’s gross expense ratio as of the prospectus dated 2/28/2025 is 0.88%.

Q. Joe, can you provide us with a quick overview of how convertibles work?

A. Convertibles are hybrid securities. A convertible bond is a fixed-income instrument with a maturity date and a coupon. What makes a convertible bond exciting is that it includes an embedded option for the investor to convert the bond into a predetermined number of shares of common stock at a predetermined price. That option becomes more valuable as the stock rises.

The convert’s combination of equity and fixed income characteristics offers several potential advantages. Because of their equity characteristics, convertibles are influenced by the movements of their underlying common stock, and have also tended to be less sensitive to interest rates compared to traditional bonds. On the other hand, fixed income characteristics—such as coupon income and repayment at maturity—can help mitigate the impact of equity market downside.

The degree of equity and fixed income sensitivity changes for an individual convertible and for the overall market over time. Some convertibles act more like stocks, and some act more like bonds, so active management is key to getting the risk-reward you want. As our Founder and Global Chief Investment Officer John P. Calamos, Sr., says, “it’s not simply the convertibles that make a strategy work, it’s how convertibles are managed to achieve a particular investment objective.”

Q. What types of companies issue convertibles?

A. Companies of all sizes across industries and geographies issue convertibles. Historically, the convertible market has been a popular choice for growth companies, including small and mid-caps. I think of the convertible market as being the home to a lot of the “leaders of tomorrow.” Many global players accessed the convertible market for capital when they were in earlier stages of their growth. Convertibles can be brought to market relatively quickly and in exchange for the equity conversion feature, investors are willing to accept lower coupons versus nonconvertible debt.

Q. Why do you believe convertibles are doing so well this year?

A. For starters, we’ve got favorable policy tailwinds for US companies, like pro-growth fiscal policies, and technology leadership. Companies are proving they can navigate tariffs, and monetary policy is less restrictive. We’re seeing fundamental momentum accelerate and broaden. As interest rates fall and the economy continues to grow, small and mid-cap companies are doing well, and as I mentioned, small and mid-cap companies are an important part of the convertible market.

The convertible market is also benefiting from an influx of issues from some very exciting companies, including AI names. This is the current chapter in the convertible market’s long history as market of growth and innovation. The first convertibles were issued by railroad companies in the 19^th century—when railroads were at the edge of innovation, and America was an emerging market. More recently, we’ve seen internet software and electric vehicles make their mark on the asset class.

With $137 billion in new paper through October, global convertible issuance is well above average and on track to reach its highest level ever. Not all these new issues will meet our criteria, and each needs to be evaluated independently. Still, we’re finding many attractive choices, and we’re excited to see the market as energized as it has been. We expect issuance to continue at a strong pace from here, supported by favorable macro conditions.

Growth capital for growth companies: Strong issuance in 2025

Source: BofA Global Research. Data as of 10/31/2025.

Q. Calamos Convertible Fund is one of the first of its kind, launched in 1985. How would you sum up the fund?

A. Calamos Convertible Fund seeks lower-volatility equity participation over the long term. For this fund, we’re using a total return approach, where we pay careful attention to both upside opportunities and downside risk management. We’re invested across the capitalization spectrum, but overall, the fund currently has a SMID tilt. As active managers, we’re always looking to rebalance to a better risk-reward and use short-term volatility to create long-term opportunities.

We’re invested across market sectors, including many names involved in secular trends such as AI. High-growth stocks tend to be more volatile in exchange for their upside potential. But the convertible structure can give us some important advantages in terms of risk management. By investing in convertibles, we have the opportunity to participate in high-growth opportunities with potentially less downside than if we were invested in the common stock. You could compare the convertible structure to “bubble wrap,” so to speak.

Q. Can you give us some examples of thematic beneficiaries of AI in fund’s portfolio?

A. We’ve found many issues with attractive structures in areas including software, hardware, power and infrastructure, and emerging data centers. The names we choose are ones that we believe support our goal of asymmetrical risk/reward—in other words, more exposure to upside than downside.

Calamos Convertible Fund: Accessing the AI ecosystem with a risk-conscious approach

The portfolio is actively managed and subject to change daily.

Q. After such a strong run up, is it too late for the investor who is thinking about adding convertibles now?

A. It’s not too late at all, in my view. Convertibles are a strategic opportunity, and we manage Calamos Convertible Fund to serve as a long-term core allocation—one that can enhance either the equity or fixed income side of an allocation. We believe that the tailwinds that have driven the convertible market so far this year are sustainable. Pro-growth fiscal policy, lower interest rates, and the broadening and accelerating bottom-up fundamentals of convertible issuers make this an exciting time for our actively managed approach.