Calamos Chart Talk: Alternatives Can Lead to a More Diversified Portfolio

Brandon Nelson, Senior Vice President, Senior Portfolio Manager of the Calamos Timpani Small Cap Growth Fund (CTSIX), discusses the potential for disproportionate rewards when investing in small cap stocks.

Brandon Nelson, Senior Vice President, Senior Portfolio Manager of the Calamos Timpani Small Cap Growth Fund (CTSIX), talks about the opportunities he and his team are seeing in the small cap space.

In a strong equity market, some convertibles can have a high degree of participation, but can also leave clients exposed to downside risk. Joe Wysocki, CFA, Senior Vice President, Co-Portfolio Manager, explains how active management helps “create a portfolio that has the optimal risk/reward throughout the full market cycles.”

Joe Wysocki, CFA, Senior Vice President, Co-Portfolio Manager, points out that convertibles have historically produced positive total returns during rising rate environments that traditional fixed income has struggled with.

Joe Wysocki, CFA, Senior Vice President, Co-Portfolio Manager, observes that technology companies are typically growth companies, often with healthy valuations. An investor in a tech company’s convertible expects to participate in the upside when anticipated growth materializes, while seeking to avoid much of the downside if it does not.

A convertible issuer’s below-investment grade rating—or no rating at all—is not the negative signal that an uninformed investor might expect, explains Joe Wysocki, CFA, Senior Vice President, Co-Portfolio Manager.

Joe Wysocki, CFA, Senior Vice President, Co-Portfolio Manager, looks at why convertibles often make sense for smaller, mid-cap companies with an established growth niche and for larger growth companies seeking capital for future growth.

Joe Wysocki, CFA, Senior Vice President, Co-Portfolio Manager, provides an overview of the convertibles market, noting “opportunities to give us the asymmetric risk/reward profile that we think is the sweet spot of convertible investing.”

Acknowledging the economy’s mixed signals, Scott Becker, Senior Vice President, Head of Portfolio Specialists, offers analysis of potential market opportunities as 2019 unfolds.

Joe Cusick, Vice President, Portfolio Specialist, comments on two essential traits that make CIHEX stand out from its peers and explains its goal of selling expensive volatility and buying cheap volatility.

Traditional portfolios don’t always provide adequate diversification, particularly during market shocks, says Joe Cusick, Vice President, Portfolio Specialist. Options-based funds offer an alternative.

Joe Cusick, Vice President, Portfolio Specialist, defines the “North Star trade” and its role in seeking to take advantage of the market’s natural drift to the upside while protecting against market shocks.

Joe Cusick, Vice President, Portfolio Specialist, favors CIHEX’s dynamic approach, pointing out that fund managers with a set it/forget it methodology could miss out on new opportunities as they arise.

Where does it fit in a client’s portfolio? According to Joe Cusick, Vice President, Portfolio Specialist, CIHEX aims for less volatility, shallow drawdowns and quicker rebounds after equity market pullbacks.

Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager, sees Japan as a standout in various technology and industrial sectors.

Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager, starts with more than 11,000 companies that are screened using proprietary valuation and quantitative tools to identify and rank opportunities.

Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager, explores opportunities to take advantage of secular tailwinds that could help drive growth of innovative companies in China.

“Valuation metrics do not incorporate things that are very important to us, like competitive moats [and the] disruption that’s happening in industries,” says Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager.

Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager, says the U.S. will “find some wins” and that China is “willing to provide those wins” in terms of trade negotiations.

Dave O’Donohue, Senior Vice President, Co-Portfolio Manager, points out how a more active, more flexible management approach helps set Calamos apart.

Dave O’Donohue, Senior Vice President, Co-Portfolio Manager, explains how the two hedging strategies have different risk profiles and return expectations.

Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-Portfolio Manager, points out the potential of convertible bonds to “generate returns similar or better than the equity market with substantially less volatility.”

Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-Portfolio Manager, explains how convertible securities can be used as part of a core equity allocation or as a fixed income alternative.

“We often like those credits,” says Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-Portfolio Manager, noting their position in the capital structure and their significant presence within the convertibles market.

Jason Hill, Senior Vice President, Co-Portfolio Manager, characterizes the strategy as having two primary components, an option-hedge portion and an S&P replication basket.

Jason Hill, Senior Vice President, Co-Portfolio Manager, describes how this model trade serves as “a compass.”

Along with his team, Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager, looks for companies that are benefiting from secular tailwinds, regardless of market cap.

Nick Niziolek, Co-CIO, Head of International and Global Strategies and Sr. Co-PM, describes the three tailwinds—the weak U.S. dollar, global synchronized growth and relative valuations—underlying Calamos’ positive view.

Emerging markets in January 2018 look attractive based on their fundamentals, relative valuations, liquidity and relative strength, explains Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager.

Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager, provides the backstory on the 2008 inception of Calamos Evolving World Growth Fund (CNWIX).

Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager, elaborates on how technologies are disrupting financial services—a development known as FinTech.

Robotics and automation solutions are being adopted by emerging economies eager to boost their productivity while controlling their expenses, says Nick Niziolek, Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager.

Matt Freund, Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager, explains that there are three main reasons to go active over passive: risk management, the composition of fixed income indices and the changing nature of fixed income indices.

Matt Freund, Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager, outlines his current fixed income concerns: high debt levels, inflation and non-U.S. developments including global central bank policy and the strength of international markets, and liquidity.

Matt Freund, Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager, cautions investors not to think about the bond market as one single, monolithic market, but to think about sectors and exposures. The team sees opportunities in select parts of the credit markets, the structured product markets, as well as the international and convertible markets.

Matt Freund, Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager, says there are interesting opportunities for a skilled manager in select corners of the credit market.

Matt Freund, Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager, discusses the common misperception that yields all along the curve have a similar reaction when the Fed raises rates. He explains that since the Fed has begun tightening, the long end of the curve has remained well behaved, and the team expects this to continue.

Matt Freund, Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager, says investors need to remember these three reasons to own fixed income: the asset needs to be cheap, provide needed income or serve as a hedge against other positions in a portfolio.

Matt Freund, Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager, explains why the team tends to take contrarian positions when building a portfolio.

Matt Freund, Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager, discusses what sets the Calamos fixed income approach apart.

Michael Grant, SVP, Senior Portfolio Manager, says a recession is not imminent. Relevering by corporates, not consumers, could be the next problem.

Michael Grant, SVP, Senior Portfolio Manager, says the team has the flexibility to “to play whatever hand the market deals us.”

Michael Grant, SVP, Senior Portfolio Manager, provides his long-range view of equities.

Michael Grant, SVP, Senior Portfolio Manager, says 2019 could be the broad topping year for equities. He and his team are monitoring two real risks for equities: the end of the expansion and competition of other asset classes.

Michael Grant, SVP, Senior Portfolio Manager, discusses why the team’s ability to asset allocate equity capital across the entire global equity universe is key in delivering superior returns.

Michael Grant, SVP, Senior Portfolio Manager, says the days of information as an investor’s edge are over. Good decisions, not good information, are what counts now.

Michael Grant, SVP, Senior Portfolio Manager, says that utilities, telecom and consumer staples are among the overvalued while opportunities in financials and selective cyclical stocks are being underestimated.

Michael Grant, SVP, Senior Portfolio Manager, reflects on the emergence of stable, synchronized global GDP growth that enabled equities to perform well in 2017.

Michael Grant, SVP, Senior Portfolio Manager, explains why he’s confident the U.S.’s expansion could continue.

Michael Grant, SVP, Senior Portfolio Manager, describes the appeal of long/short equity: to act like a long-only investor when the environment is favorable and yet to have the flexibility to preserve capital when the environment turns.

Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-PM, explains how convertible arbitrage investors may see opportunities where long only equity investors don’t.

Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-PM, says the goal is to buy low and sell high, generate coupon income and trade around the portfolio.

Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-PM, explains that convertible arbitrage has performed well in most equity market environments—and that the strategy has done its best in declining equity markets historically.

Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-PM, discusses the extensive background of our convertible arbitrage strategy.

Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-PM, outlines the sources of income from convertible arbitrage, including: coupon income from the convertible bond, short interest credit, capital appreciation from convertibles and rebalancing/trading profits.

Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, Senior Co-PM, says the $300 billion asset class is big enough to yield opportunities yet small enough to still be an investment niche.

Robert F. Bush, Jr., Director of Closed-End Fund products, discusses how the Calamos closed-end funds seek to address many key issues facing investors today.

Nick Niziolek, Co-CIO, explains the origin of the Calamos Evolving World Growth Fund and the reasons we believe it is a unique emerging market solution.
For more about seeing emerging markets our way, see our microsite www.calamos.com/ourway.

Michael Grant, SVP, Senior Co-Portfolio Manager, breaks down his philosophy and approach to the Calamos Phineus Long/Short Fund. Key topics include the long/short model, manager flexibility, and the structure used to implement investment ideas within the portfolio. Video recorded June 29, 2016.

Michael Grant, SVP, Senior Co-Portfolio Manager, discusses how the Calamos Phineus Long/Short Fund differs from “traditional” long/short funds. Key differentiating characteristics include dynamic asset allocation, manager flexibility and style.

Todd Speed, CFA, Portfolio Specialist, discusses some EM secular trends that we believe provide a tailwind for growth.

Scott Becker, CFA, Head of Portfolio Specialists, discusses that even when stocks finish up for the year, drawdowns have been par for the course.

Co-Portfolio Managers David O’Donohue and Jason Hill discuss how convertible arbitrage strategies can potentially capitalize from increased market volatility through gamma trading.

Against the backdrop of equity volatility and an uncertain Fed timeline, convertible securities may provide distinct advantages, explains Eli Pars, CFA.

Shawn Park, Director of Product Management and Analytics, discusses key components to consider when selecting long/short managers for an asset allocation in alternatives.

Eli Pars, Sr. Co-Portfolio Manager, discusses default rates in the convertible bond market, which have been consistently lower than those of high yield bonds.