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Pursuing A Comfortable Way of Investing in Turbulent Markets: CIHEX
February 22, 2018
How can financial advisors get their clients comfortable in the turbulence that has returned to the markets this month?
Since 1990, many have turned to Calamos Market Neutral Income Fund (CMNIX), whose consistency and resiliency has helped make it the largest fund in Morningstar’s Market Neutral category as of 12/31/17. The $4.8 billion CMNIX combines two risk-managed strategies—convertible arbitrage and covered call writing—with the intention of building and preserving capital. (See this post for an update on its performance during the latest market shock and to register for a webcast next week.)
To meet heightened advisor demand for a risk-managed fund that provided a higher level of equity market exposure, Calamos four years ago launched Calamos Hedged Equity Income Fund (CIHEX). CIHEX is an alternative fund that exclusively uses covered call writing for the purpose of generating income and managing risk.
While the same team manages both funds, following the same philosophy, there’s one key difference, CIHEX “is designed to be a higher octane approach,” explains Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies and Senior Co-Portfolio Manager.
For more information about the fund, including its performance over three periods when the S&P 500 has been down more than 5%, download this joint interview with Pars and John P. Calamos, Sr., Calamos Founder, Chairman and Global Chief Investment Officer.
Advisors, for more information, please talk to your Calamos Investment Consultant at 888-571-2567 or email [email protected].
Calamos ranks sixth on the list of alternative fund managers by assets under management in the Morningstar Alternatives Category as of 12/31/17—up from its #10 position at 12/31/16.
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 or call 1-800-582-6959. Read it carefully before investing.
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.
The principal risks of investing in the Market Neutral Income Fund include: equity securities risk consisting of market prices declining in general, 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, convertible hedging risk, covered call writing risk, options risk, short sale risk, interest rate risk, credit risk, high yield risk, liquidity risk, portfolio selection risk, and portfolio turnover risk.
Covered Call Writing: As the writer of a covered call option on a security, the fund foregoes, during the option’s life, the opportunity to profit from increases in the market value of the security, covering the call option above the sum of the premium and the exercise price of the call.
Convertible Securities Risk: The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also, may have an effect on the convertible security’s investment value.
Convertible Arbitrage Risk: If the market price of the underlying common stock increases above the conversion price on a convertible security, the price of the convertible security will increase. The fund’s increased liability on any outstanding short position would, in whole or in part, reduce this gain.
S&P 500 Index is generally considered representative of the U.S. stock market.
The principal risks of investing in the Calamos Hedged Equity Income Fund include: covered call writing risk, options risk, equity securities risk, correlation risk, mid-sized company risk, interest rate risk, credit risk, liquidity risk, portfolio turnover risk, portfolio selection risk, foreign securities risk, American depository receipts, and REITs risks.
Options Risk: The Fund’s ability to close out its position as a purchaser or seller of an over-the-counter or exchange-listed put or call option is dependent, in part, upon the liquidity of the option market. There are significant differences between the securities and options markets that could result in an imperfect correlation among these markets, causing a given transaction not to achieve its objectives. The Fund’s ability to utilize options successfully will depend on the ability of the Fund’s investment adviser to predict pertinent market movements, which cannot be assured.
Morningstar Market Neutral Category represent funds that attempt to eliminate the risks of the market by holding 50% of assets in long positions in stocks and 50% of assets in short positions.