Market’s Down Hundreds of Points—And All Is Calm at Calamos
November 21, 2018
“Rough week for you, huh?” a friend asked a Calamos associate last night.
“Oh, because of the market you mean? Yeah, that’s not how we see it,” said the well trained associate.
Investors can panic when markets fall, and financial advisors can be swamped with visits, calls and emails. Even some asset managers react by hunkering down until the storm blows over.
None of that—no panicking, no phones ringing off the wall and definitely no hunkering down—is happening at Calamos. For more than 40 years our Founder, Chairman and Global CIO John P. Calamos, Sr. has described volatility as the flipside of opportunity, and that’s how the volatility is being viewed today.
These are the moments that Calamos investment management prepares for. Calamos’ approach to risk management is at the top of the list of why advisors entrust their clients' wealth with us, whether via convertible securities strategies, liquid alternatives, or fixed income.
To pursue the upside while protecting on the downside: that’s the undercurrent of how Calamos manages money. Corrections are inevitable and all concerned do what they can to shield investment portfolios from the kind of short-term shocks that undermine investment objectives and investor confidence.
Portfolio Managers Embrace the Opportunity
What kind of week have Calamos investment professionals had? Hear from them directly in insights that first appeared in our Calamos Volatility Opportunity Guide (financial advisors, contact your Investment Consultant for copies to use with your clients).
Matt Freund, CFA
Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager
“Market volatility can lead to margin calls, regret over ‘losses’ or anxiety over the risk profile of a portfolio—resulting in investors becoming forced sellers, and forced sellers are price-takers, typically at unattractive prices. That’s unfortunate.
But there is an upside to market dynamics. For those investors who maintain healthy cash balances, manage leverage and take a long-term view, market volatility provides opportunities. This is especially true when the volatility is not related to changes in the underlying fundamentals of their investments. When an investment’s fundamentals are unchanged but now available for purchase at a more attractive price, that can be a positive. The seller’s pain is the buyer’s gain.”
“Separating the signals from the noise in the market is often the most difficult part of our job, and in periods of extreme volatility, getting caught up in the day-to-day moves can be a big distraction. One of the key lessons: You can manage the risks, but you cannot manage the returns.”
“Volatility provides us the opportunity to readjust the risk/reward of portfolios to provide what we believe will be the best profile given where we are in an economic business cycle.”
Co-CIO, Sr. Co-Portfolio Manager, Global Long/Short and U.S. Growth Strategies
“Volatility is the sign that one should prepare to buy. While it may not feel like it at the time, periods of high volatility are invariably the lowest risk moments to own equities because the ‘problems’ are more widely understood.”
“Market movement creates opportunities for us to adjust our hedges, but also to alter or exit many of our trades and enter into new trades that didn’t exist previously. And, as volatility increases we find that asset class correlations break down.”
For more on our strategies, see these recent posts:
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. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.