Convertible securities are an opportunity for investors who want to participate in equities but are willing to exchange the maximum possible upside for protection against the downside of equities. The asset class was pioneered by Calamos Founder, Chairman and Global CIO John P. Calamos, Sr., more than 40 years ago.
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Why Convertibles?
Actively managed convertible securities can be deployed strategically and tactically in an asset allocation, as Calamos Founder, Chairman and Global CIO John Calamos, Sr. and Eli Pars, Co-CIO, Head of Alternative Strategies and Co-Head of Convertible Strategies, and Senior Co-Portfolio Manager discuss in this video.
Convertibles Bonds Have Been Consistent Top Performers
The top-performing fixed income asset class? While fixed income asset classes may trade places year after year, there has been no asset class that can rival convertible bonds in terms of performance consistency.
Convertible bonds have been the top performing asset class for five of the last 10 years and sit on top year-to-date as of 12/31/19.
Source: Bloomberg and Morningstar. Past performance is no guarantee of future returns.
- Convertible bonds are represented by the ICE BofAML All U.S. Convertibles Index (VXA0), a gauge of the performance of the U.S. convertible market.
- U.S. aggregate bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index, covers the U.S.-denominated, investment grade, fixed rate, taxable bond market of SEC-registered securities.
- High yield bonds are represented by the Credit Suisse U.S. High Yield Index, an unmanaged index of high yield debt securities.
- U.S. government bonds are represented by the Bloomberg Barclays U.S. Government Index, an unmanaged index considered representative of fixed income obligations issued by the U.S. Treasury, government agencies and quasi-federal corporations.
- Treasury bills are represented by the Bloomberg Barclays U.S. Treasury Bill 1-3 Month Index, is a component of the Short Treasury Index and includes aged U.S. Treasury bills, notes and bonds with a remaining maturity from 1 up to (but not including) 12 months.
- U.S. investment grade bonds are represented by the Bloomberg Barclays U.S. Corporate Investment Grade Index, consists of publicly issued, fixed rate, nonconvertible, investment grade debt securities.
- U.S. Securitized, represented by the Bloomberg Barclays U.S. Securitized MBS/ABS/CMBS Index, includes the MBS, ABS, and CMBS sectors. The index does not reflect fees, brokerage commissions, taxes or other expenses of investing.
- Government bonds ex. U.S. are represented by the ICE BofAML Global Government Bond Index, excluding U.S., tracks the performance of investment grade sovereign debt publicly issued and denominated in the issuer's own domestic market and currency.
- Preferreds are represented by the ICE BofA Fixed Rate Preferred Securities Index, comprised of investment grade fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market.
The Latest on Convertibles
Investment Ideas Blog: Converts
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In discussing recent market volatility, Joe Wysocki, CFA, Senior Vice President, Co-Portfolio Manager, and Jon Vacko, CFA, Senior Vice President, Co-Portfolio Manager, highlighted three main themes for evaluating and participating in the convertible securities market during turbulent times.
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John Hillenbrand, CPA, Co-CIO, and Senior Co-Portfolio Manager of Calamos Growth and Income Fund (CGIIX) , describes the near-term signs of the market bottoming process that his team is watching for.
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Calamos Convertible Fund (CICVX) and Calamos Global Convertible Fund (CXGCX) once again demonstrated the potential benefit of active management, significantly outperforming the S&P 500 during the sharp selloff in February 2020.
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The declining interest rates of the past decade provided a strong tailwind for bond funds. And yet, Calamos Market Neutral Income Fund (CMNIX) managed to add value by delivering a bond-like return with a bond-like standard deviation but without the bond-like risk exposures.
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The Calamos Convertible Fund (CICVX) kept pace with the S&P 500 Index in both up and down markets over the past two years, providing an alternative for investors seeking to hedge equity risk over a full market cycle.
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As it reaches its 5-year anniversary, Calamos Global Convertible Fund (CXGCX) remains the only U.S.-based global convertible fund—and it still offers opportunities to diversify beyond the U.S. market and hedge equity risk.
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Here’s why we call the market neutral fund category leader both consistent and resilient.
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This hypothetical illustration shows how Calamos Market Neutral Income Fund (CMNIX) would have been a consistent source of retirement income over the course of a 30-year bull market for bonds.
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Calamos Convertible Fund (CICVX) offered financial advisors an alternative way to manage equity risk in clients’ portfolios without surrendering investment return.
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For clients whose risk profile is more conservative, CMNIX is an income alternative to getting completely out of the market.
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Do you have a shock absorber in place for your clients to help shield their portfolios when the next sharp downturn happens?
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In this video Q&A series, Joe Wysocki, CFA, Senior Vice President, Co-Portfolio Manager, provides an overview of what’s happening in the convertible securities market, explains the role convertibles play in a portfolio and offers insight into the factors that have an impact on pricing and issuance.
Investment Team Voices Blog: Converts
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For John P. Calamos, Sr., the recent market downturn is reminiscent of conditions in 1987. He explains why conditions point to a V-shaped recovery and why he believes convertible securities are extremely compelling.
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For investors who recognize the importance of global equity market exposure but are concerned about volatility, global convertible securities may be just the ticket.
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Wild market swings. Slowing global growth. Impeachment controversy. Trade tensions. Global political uncertainty. These have not been easy months for investors, but there are still many opportunities, explains John P. Calamos, Sr., the founder and global CIO of Calamos Investments. John shares his ideas about how to position asset allocations in this volatile environment.
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Volatility can strengthen the tailwinds for the gamma trading Calamos does in our market neutral income strategy. But even without high levels of market volatility, our team can find still opportunities, explains Co-Portfolio Manager Jason Hill.
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As volatility returns to the stock market, many investors are feeling unsettled and maybe even panicked. Drawing on more than 40 years of experience in the markets, John P. Calamos, Sr. discusses the importance of a long-term approach.
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Pullbacks are a normal part of investing, and the U.S. economy can withstand this selloff. During volatile periods in the markets, long-term perspective essential because there are still opportunities for active managers.
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Convertible securities may be less well known than stocks and bonds, but they offer many potential benefits. Global Chief Investment Officer John P. Calamos, Sr. explains why he believes the case for actively managed convertibles is especially strong today.
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Global Chief Investment Officer John P. Calamos, Sr. explains why the case is strong for convertible securities.
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Global Chief Investment Officer John P. Calamos, Sr. explains why convertible securities offer a wide range of potential benefits, thanks to their combination of stock and bond attributes.
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Global Chief Investment Officer John P. Calamos, Sr. explains why the case is strong for convertible securities.
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Eli Pars discusses how convertible securities have performed as interest rates have risen and explains why the remainder of 2017 is setting up to be a good year for the asset class.
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John P. Calamos, Sr. shares his thoughts on changing market conditions and the role that convertible securities can play in responding.
@Calamos on #Converts
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For issuers, #convertiblesecurities are all about providing access to capital, says @JohnPCalamosSr. bit.ly/2UlDAg8
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Now is not the time to move to the sidelines, says @JohnPCalamosSr. But the uncertainty of COVID-19 and market #volatility continues. In this environment, risk management—including #convertiblesecurities—is crucial. bit.ly/2JhNmJQ
Whitepapers
- Convertible Securities Offer Many Benefits, Including as a Hedge Against Inflation
- John P. Calamos, Sr. October 22, 2018 Q&A with Wall Street Transcript
- Convertible Securities: Potential Advantages in Rising Interest Rate Environments
- The Opportunity of Convertible Securities
- The Case for Strategic Convertible Allocations
Accessing the Asset Class
- Calamos Convertible Fund (CICVX)
- Calamos Growth and Income Fund (CGIIX)
- For global exposure: Calamos Global Convertible Fund (CXGCX), the only U.S. based global convertible fund
- Calamos Global Growth and Income Fund (CGCIX)
- In an emerging markets fund: Calamos Evolving World Growth Fund (CNWIX)
- Via a liquid alt: Calamos Market Neutral Income Fund (CMNIX)
FINANCIAL ADVISORS, CONTACT US
Call 888-571-2567 or email caminfo@calamos.com
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. 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.
Important Risk Information. 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 Convertible Fund include: 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 consisting of fluctuations inconsistent with a convertible security and the risk of components expiring worthless, foreign securities risk, equity securities risk, interest rate risk, credit risk, high yield risk, portfolio selection risk and liquidity risk.
The principal risks of investing in the Calamos Growth and Income Fund include: 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 consisting of fluctuations inconsistent with a convertible security and the risk of components expiring worthless, equity securities risk, growth stock risk, small and midsized company risk, interest rate risk, credit risk, liquidity risk, high yield risk, forward foreign currency contract risk and portfolio selection risk.
The principal risks of investing in the Calamos Global Convertible Fund include: equity securities risk consisting of market prices declining in general, growth stock risk consisting of potential increased volatility due to securities trading at higher multiples, foreign securities risk, emerging markets risk, currency risk, geographic concentration risk, American depository receipts, mid-size company risk, small company risk, portfolio turnover risk and portfolio selection risk.
The principal risks of investing in the Calamos Global Growth and Income Fund include: 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 consisting of fluctuations inconsistent with a convertible security and the risk of components expiring worthless, foreign securities risk, emerging markets risk, equity securities risk, growth stock risk, interest rate risk, credit risk, high yield risk, forward foreign currency contract risk, portfolio selection risk, and liquidity risk.
The principal risks of investing in Calamos Evolving World Growth Fund include: equity securities risk consisting of market prices declining in general, growth stock risk consisting of potential increased volatility due to securities trading at higher multiples, foreign securities risk, emerging markets risk, 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, and portfolio selection risk.
The principal risks of investing in the Calamos 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.
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.
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