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Heading Toward the Emerging Markets End Zone Like a Champion Quarterback
February 6, 2017
Some people see things—yesterday's big game, for example—as they are and say, “Great game!”
But our Calamos Global and International Portfolio Specialist Todd Speed, CFA, watched and thought, “Champion quarterbacks and the Calamos Evolving Growth Fund have a lot in common.”
Bear with us now, here’s Speed’s take.
“The best quarterbacks,” Speed says, “manage the risks of accessing the end zone. The best offense truly is a good defense. Their focus is on Touchdown to Interception Ratios. They’re managing risks, relying on short and quick passes to move down the field. The goal is to limit the downside, minimizing mistakes.”
Just as MVP quarterbacks minimize interceptions, CNWIX’s goal has been to minimize what threatens investors’ progress: the impact of market selloffs.
CNWIX’s focus has been to participate in the upside while limiting the downside to create a better result over time. While the best quarterbacks use efficient passes to target opportunities, our fund has gotten the job done with targeted investments over time (see a 2016 whitepaper, “Fine-tuning Exposure to Emerging Economies” (this link opens a PDF).
Winning quarterbacks have their own styles, and we do too—we call it emerging markets our way (see our microsite, including EM Snapshot subscription series).
Risk-managed EM Investing Year In/Year Out
Ultimately, quarterbacks are measured both by games won, and by how often they lead their teams to the big game. For example, the most successful quarterback has played in seven of the big games in 16 years—almost half of his professional career.
Speed points to the fact that the fund has outperformed about 67% of rolling three-year periods, reducing risk along the way.
As on the field, each season brings its share of challenges. Emerging markets in 2016 were driven by a narrow rally in higher beta cyclicals for most of the year. Relatively lower quality companies, including many State-Owned Enterprises (SOEs), produced the strongest gains in the index.
Since the start of this year, Speed notes that emerging markets fundamentals are mattering much more to investors. Better return on invested capital (ROIC), earnings growth, upside catalysts and aspects of secular growth and cyclicality combined to produce broader market returns in the first five weeks of 2017.
Emerging markets trends are improving overall, he says.
Many investors sold or shunned EM assets after the U.S. election (and the quick run-up in the dollar, interest rates, Trump trades, etc.). But, when few were looking, the MSCI EM Index turned positive and, through January 31, led vs. developed markets and the Standard & Poor’s 500.
U.S. equities are at an all-time high. But, the MSCI EM Index closed at 918 on February 3, about the same as seven years ago. “How many assets can investors buy today at near 2010 levels?” Speed asks.
Financial advisors, please see the Calamos Evolving World Growth Fund profile for more information or talk to your Calamos Investment Consultant at 888-571-2567 or [email protected].
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 Evolving World Growth Fund include: equity securities risk, growth stock risk, foreign securities risk, emerging markets risk, convertible securities risk and portfolio selection 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.
Foreign Securities Risk: Risks associated with investing in foreign securities include fluctuations in the exchange rates of foreign currencies that may affect the U.S. dollar value of a security, the possibility of substantial price volatility as a result of political and economic instability in the foreign country, less public information about issuers of securities, different securities regulation, different accounting, auditing and financial reporting standards and less liquidity than in U.S. markets.
Emerging Markets Risk: Emerging market countries may have relatively unstable governments and economies based on only a few industries, which may cause greater instability. The value of emerging market securities will likely be particularly sensitive to changes in the economies of such countries. These countries are also more likely to experience higher levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets.
Morningstar Diversified Emerging Markets Category is comprised of funds with at least 50% of stocks invested in emerging markets.
The MSCI Emerging Markets Index represents large and mid-cap companies in emerging markets countries. 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.
The S&P 500 Index is considered generally representative of the U.S. stock market. Indexes are unmanaged, do not entail fees or expenses and are not available for direct investment.
Beta is a historic measure of a fund's relative volatility, which is one of the measures of risk; a beta of 0.5 reflects 1/2 the market's volatility as represented by the S&P 500 Index, while a beta of 2.0 reflects twice the market's volatility.
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.
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.