Funding Retirement With Global Opportunity Plus Flexibility
March 25, 2019
A few months ago, we described how using the U.S.-focused Calamos Convertible Fund (CICVX) would have helped smooth the ride of a 65-year-old retiree seeking to fund a 20-year retirement. By buffering the volatility of a period that covered the dot-com bubble and the Great Financial Crisis, CICVX made returns more consistent and reliable. It participated in equity market gains while limiting the downside (see Could Calamos Convertible Fund Help Reduce Your Retirees’ Worries?).
Now let’s take a look at how the Calamos Global Growth and Income Fund, with its lower-volatility global strategy utilizing convertible securities and equities, achieved similar success over the same time period. We’ll compare the performance of its oldest share class, A Shares or CVLOX, since its inception in September of 1996 against the MSCI ACWI Index.
The hypothetical illustration below compares how a sum of $500,000 invested in CVLOX and an investment that mirrored the MSCI ACWI Index would have funded a retirement of 20+ years. Both assume annual withdrawals, starting with $30,000 in Year One, then adjusted by 3% for inflation each year, to generate an identical total income amount of $973,587.
As shown, the fund outperformed at various times during the period, such as the four-year span from the start of 1999 through the end of 2002. The fund gained 45.98% in 1999, followed by three years with single-digit negative returns. In comparison, the MSCI ACWI Index advanced 26.13% in 1999 and suffered double-digit negative returns in the next three years.
Another stretch of outperformance occurred later, when the market value of the fund surged from $576,507 at the end of 2008 to $700,831 at the end of 2011. In contrast, the index ended the three-year period lower.
What helped in this case was our active management, using our active levers to manage the fund’s risk profile and to adjust country allocations to favor developed markets and higher-quality securities—something not available to an index fund with a relatively static exposure to what in 2011 were underperforming emerging markets.
Throughout the investment period, the fund progressed at a steady pace, as the hypothetical illustration demonstrates. During drawdowns and double-digit declines, the fund lost less than the index while still participating in periods of strong growth.
The end result? Take a look at the difference in the ending values: $597,081 versus $81,641. The fund would have provided enough for retirement well beyond a 20-year period.
Withdrawal Example: Calamos Global Growth and Income Fund vs. MSCI ACWI
$500,000 INITIAL INVESTMENT, $30,000 END-OF-YEAR WITHDRAWALS, 3% ANNUAL INFLATION
TOTAL INVESTMENT: $500,000
TOTAL WITHDRAWALS: $973,587
CALAMOS GLOBAL GROWTH AND INCOME FUND ENDING VALUE: $597,081
MSCI ACWI INDEX ENDING VALUE: $81,641
(9-9-96 to 2-28-19)
YEAR-END VALUE ($)
|MSCI ACWI INDEX YEAR-
END VALUE ($)
We understand that the difference between the fund and its benchmark are stunning. Advisors, you’ll want to view the underlying hypotheticals for yourselves. Please call 888-571-2567 or email [email protected] for more information about the Calamos Global Growth and Income Fund (I Share symbol: CGCIX).
Of course, it’s impossible to know what the future will bring, and whether such a discrepancy would recur between this fund and the MSCI ACWI Index at another time. As shown, dramatically different results are possible across 20 years, 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.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. Opinions are subject to change due to changes in the market, economic conditions or changes in the legal and/or regulatory environment and may not necessarily come to pass. This information is provided for informational purposes only and should not be considered tax, legal, or investment advice. 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.
Alternative investments are not suitable for all investors.
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.