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Watch: The Specific Appeal of Convertible Securities
July 26, 2018
Convertible securities can be a valuable addition to an investment portfolio, as Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-Portfolio Manager, explains in the following series of brief videos.
Convertible Bonds Offer an Asymmetric Return Profile
Convertibles “are really the only way to get asymmetric return profile into a portfolio in any kind of institutional size,” Pars explains.
Pars describes the essential appeal of convertibles over a full market cycle, pointing out their historic ability to “generate returns similar or better than the equity market with substantially less volatility.”
Why We Like Unrated Convertibles
Unrated convertibles make up a significant segment of the market, and our team brings a depth of experience to doing its own credit work to evaluate them.
“We oftentimes like those credits,” says Pars, noting their position in the capital structure. And, “the default rate in a lot of non-rated securities is better than you might expect,” he adds.
Convertibles: For an Equity or Bond Allocation
Whether used as part of a core equity allocation or tactically as a fixed income alternative, convertible securities have the potential to reduce portfolio risk.
Convertibles are a particularly timely strategy now as “convertibles tend to perform well in a rising rate environment,” explains Pars.
Financial advisors, for more information about our convertible-using funds, talk to a Calamos Investment Consultant at 888-571-2567 or email [email protected].
Videos recorded 05/01/18.
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.
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. The opinions and views of third parties do not represent the opinions or views of Calamos Investments LLC. 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.
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.