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Taking Advantage of New Global Convertible Issuance to Enhance Risk/Reward

Eli Pars, CFA

  • CXGCX’s positioning reflects our expectation for continued volatility.
  • We are encouraged by global convertible issuance trends, including new investment-grade paper coming to market during the first quarter.

Well, the Fed finally broke something. There has been a lot of conversation about tightening cycles ultimately triggering financial accidents. The collapse of Long-Term Capital Management and Lehman are top of mind. Does Silicon Valley Bank’s implosion signal the bottom of this cycle? It’s hard to say, but quite possibly it’s at least the start of a bottoming process. With signs of weakness in the real economy popping up, it’s reasonable to think we are close to the end of the Fed’s tightening cycle. Whether we are close to the start of the next Fed easing cycle may determine the path the market takes from here. 

During the first quarter, $19.7 billion in new global convertible issuance came to market, including many attractively structured deals. This uptick in new issuance gave us the opportunity to marginally increase Calamos Global Convertible Fund’s risk level closer to the level of risk in the global convertible market. Overall, however, we remain cautious and are prepared for continued volatility.

In our January commentary, we noted that higher interest rates could bring investment-grade issuers back to the market. The addition of several investment-grade names to the convertible market was a welcome sight this quarter. We took advantage of this new issuance to modestly upgrade both the risk/reward and credit quality of the portfolio. The fund remains overweight to the United States and the technology sector and underweight to Europe.



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, 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.

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 in the Calamos Global Convertible Fund include: equity securities risk consisting of market prices declining in general, growth stock risk consisting of potential increased volatility due to securities trading at higher multiples, foreign securities risk, emerging markets risk, currency risk, geographic concentration risk, American depository receipts, midsize company risk, small company risk, portfolio turnover risk and portfolio selection risk.

Foreign security risk: As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to the potential for greater economic and political instability in less developed countries.