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A Nasty October Should Give Way to More Equity Upside, Expects CPLIX’s Grant
November 2, 2018
October was a grisly month in what has been a bull not a bear market for U.S. equities. Given its bias toward capital preservation for most of the year, Calamos Phineus Long/Short Fund (CPLIX) was down just -0.57% for the month.
By comparison, the S&P 500 had its worst October since 2011. At the height of the month’s drawdown from Oct. 4 to Oct. 29, the S&P was down 9.63% but finished -6.84%, thanks to the month’s last two days.
CPLIX also held its own as other long/short equity funds stumbled. The fund’s deviation from the Morningstar Long/Short category is a consistent characteristic of the fund, reflecting its active beta and exposure management (see interactive chart below). Many peers keep a low and consistent beta (for more, see this post).
This difference, as illustrated in the chart below, is why Michael Grant, Calamos Co-CIO, Head of Global Long/Short Strategies and Senior Portfolio Manager of CPLIX, calls many other long/short funds “long light.”
Past performance is not guarantee of future results. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
Grant acknowledges having been contrarian in his positioning in 2018, having overweighted Financials for their fundamentals and valuations and avoiding overcrowded mega-cap growth technology stocks.
“Our approach in 2018 has been one of caution and patience. This has proven fortuitous as general equity losses have accumulated as the year has progressed. In October, the bear trend became more substantial, more geographically widespread and nastier with respect to individual stocks than the major U.S. benchmarks,” he says.
After Tuesday’s midterm elections, however, Grant expects a respite for U.S. equities. “The equity bull market is not dead yet,” he says. “Monetary normalization is likely to pause in the fourth quarter, allowing the S&P 500 one more assault on the 3000 level.”
Financial advisors, for more from Grant on positioning for the last hurrah, register for our Nov. 8 webcast.
To talk to a Calamos Investment Consultant, call 888-571-2567 or email [email protected].
Calamos ranks fifth on the list of alternative fund managers by assets under management in the Morningstar Alternatives Category as of 9/30/18.
Data as of 9/30/18
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The principal risks of investing in the Calamos Phineus Long/ Short Fund include: equity securities risk consisting of market prices declining in general, short sale risk consisting of potential for unlimited losses, foreign securities risk, currency risk, geographic concentration risk, other investment companies (including ETFs) risk, derivatives risk, options risk, and leverage risk.
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Alternative investments may not be suitable for all investors, and the risks of alternative investments vary based on the underlying strategies used. Many alternative investments are highly illiquid, meaning that you may not be able to sell your investment when you wish to.
Active management does not guarantee investment returns or eliminate the risk of loss.
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
S&P 500 Index is a market weighted index and is widely regarded as the standard for measuring U.S. stock market performance.
HFRI Equity Hedge Index consists of funds where portfolio managers maintain long and short positions in primarily equity and derivative securities.
MSCI World Index is a market capitalization weighted index composed of companies representative of the market structure of 21 developed market countries in North America, Europe, and the Asia/Pacific region. Unmanaged index returns assume reinvestment of any and all distributions and do not reflect fees, expenses or sales charges. Investors cannot invest directly in an index. The MSCI World Index consists of the following 23 developed market country indexes: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Morningstar U.S. Funds Long/Short Category: Long-short portfolios hold sizable stakes in both long and short positions in equities and related derivatives. Some funds that fall into this category will shift their exposure to long and short positions depending on their macro outlook or the opportunities they uncover through bottom-up research. Some funds may simply hedge long stock positions through exchange-traded funds or derivatives. At least 75% of the assets are in equity securities or derivatives.