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Could Calamos Convertible Fund Help Reduce Your Retirees’ Worries?

The financial advisor’s retirement planning challenge: Based on current life expectancies, a 65-year-old retiree faces the prospect of needing to fund a retirement period that is likely to last approximately 20 years. How will you—his or her advisor—help secure a source of income that can be relied on for decades?

Most retirement specialists, including Calamos, would argue that exposure to the stock market is essential to provide sufficient growth. Unfortunately, widely varying returns from the stock market can mean widely varying results for investors, depending on when they invest and in what.

Unlike younger investors, retirees can’t afford the time required to recover from major market drawdowns. As illustrated below, the larger the loss, the larger the subsequent gain that’s needed to recover lost ground and get back to the original value. Losing 10%, for example, is recovered from with a subsequent return of 11%. But a 40% drawdown? That requires a gain of 67% to break even.

Portfolio Loss and Recovery Chart

For retirees, then, limiting losses can be just as important as maximizing gains. Advisors, consider Calamos Convertible Fund (CICVX) for a strategy that aims to buffer volatility and make returns more consistent—participating in equity market gains while limiting downside. Strategic use of convertible securities has helped the fund preserve capital and position for growth over time.

The hypothetical illustration below compares the path of the fund versus the S&P 500 over the last 20 years (10-1-98 to 9-30-18). Over time, the fund's difference was its ability to lose less during drawdowns and experience drops less frequently. Because an investment didn’t fall as steeply (early in the period in particular), the fund preserved more of its value and kept on growing.

The table below shows that the year-end value of the S&P 500 was lower than the previous year in 13 of the years included in the period measured (as opposed to the fund's nine), and the S&P needed time to recover from those losses. Retired investors who may have relied too heavily on equity allocations would have had many anxious moments.

This hypothetical illustration shows how a sum of $500,000 invested in either Class A Shares of the Calamos Convertible Fund or an investment that mirrored the S&P 500 Index would have funded a 20-year retirement. This would have enabled withdrawals starting with $30,000 (adjusted by 3% for inflation each year) for an identical total income amount of $806,109. But look at the difference in the ending values: $634,535 versus $61,253. The fund would have provided enough for retirement well beyond age 85.

Withdrawal Example: Calamos Convertible Fund vs. S&P 500 Index


(10-1-98 to 9-30-18)
1998 500,000 30,000 534,154 595,301
1999 0 30,900 690,805 689,661
2000 0 31,827 709,081 595,045
2001 0 32,782 645,966 491,537
2002 0 33,765 582,743 349,140
2003 0 34,778 693,717 414,511
2004 0 35,821 710,221 423,797
2005 0 36,896 693,353 407,718
2006 0 38,003 718,672 434,111
2007 0 39,143 750,143 418,818
2008 0 40,317 515,718 223,547
2009 0 41,527 649,539 241,181
2010 0 42,773 677,147 234,738
2011 0 44,056 606,116 195,639
2012 0 45,378 594,371 181,570
2013 0 46,739 668,676 193,639
2014 0 48,141 653,596 172,004
2015 0 49,585 578,996 124,799
2016 0 51,073 553,369 88,652
2017 0 52,605 580,059 55,401
2018 0 0 634,535 61,253

CCVIX and S&P 500 Hypothetical Portfolio Illustration

Past performance is not a guarantee of future results. The hypothetical illustration above shows how a $500,000 investment in the Calamos Convertible Fund would have compared to the performance of the S&P 500 Index over the 20-year period from 10/1/98 to 9/30/18. In both scenarios, withdrawals of $30,000 (adjusted by 3% for inflation) are made each year for an identical total income amount of $806,109. Unmanaged index returns assume reinvestment of any and all distributions and, unlike fund returns, do not reflect fees, expenses or sales charges. Investors cannot invest directly in an index.

We understand that these results are stunning and, advisors, you’ll want to see the underlying hypotheticals for yourselves. Please contact your Calamos Investment Consultant at 888-571-2567 or email [email protected] for more information about the Calamos Convertible Fund, whose I share is CICVX.

Of course, it’s impossible to know what the future will bring, and whether such a discrepancy would recur between our convertible fund and the S&P. This 20-year window shows that dramatically different results are possible, but it by no means guarantees similar performance across other time frames. While the timing and extent of drawdowns will always be impossible to predict, it’s not a stretch to say they can create conditions that warrant a long-term, diversified investment approach.

If nothing else, this illustration can be used to demonstrate—in dollars and cents—the value of protecting against the downside. This is why convertible securities investors are willing to exchange maximum possible upside—and, as this hypothetical historical illustration shows, why it may be to the investor’s benefit over the long term.

Data as of 9/30/18
Convertible Fund Average Annual Returns Chart

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 1-800-582-6959. Read it carefully before investing.

The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market of SEC-registered securities. The index includes bonds from the Treasury, Government-Related, Corporate, MBS (agency fixed rate and hybrid ARM pass-throughs), ABS, and CMBS sectors.

The ICE BofAML All U.S. Convertibles Index (VXA0) comprises approximately 700 issues of only convertible bonds and preferreds of all qualities. Source ICE Data Indices, LLC, used with permission. ICE permits use of the ICE BofAML indices and related data on an ‘as is’ basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofAML Indices or data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing and does not sponsor, endorse or recommend Calamos Advisors LLC or any of its products or services.

The S&P 500 Index is a market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation. It is widely regarded as the standard for measuring U.S. stock-market performance.

The Value Line Convertible Index is an equally weighted index of the largest convertibles. Unmanaged index returns assume reinvestment of any and all distributions and, unlike fund returns, do not reflect fees, expenses or sales charges. Investors cannot invest directly in an index.

Morningstar Convertibles Category funds are designed to offer some of the capital appreciation potential of stock portfolios while also supplying some of the safety and yield of bond portfolios. To do so, they focus on convertible bonds and convertible preferred stocks. Convertible bonds allow investors to convert the bonds into shares of stock, usually at a preset price. These securities thus act a bit like stocks and a bit like bonds.

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 Convertible Fund include: convertible securities risk consisting of the potential for a decline in value during periods of rising interest rates and the risk of the borrower to miss payments, synthetic convertible instruments risk consisting of fluctuations inconsistent with a convertible security and the risk of components expiring worthless, foreign securities risk, equity securities risk, interest rate risk, credit risk, high yield risk, portfolio selection risk and liquidity 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 potential for greater economic and political instability in less developed countries.

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