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.
The Case for Strategic Convertible Allocations
The July 2020 Case for Strategic Convertible Allocations, written by John P. Calamos, Sr., Founder, Chairman and Global CIO, and Eli Pars, CFA Co-CIO and Senior Co-Portfolio Manager, argues that the structural characteristics of convertibles can serve investors well, given Calamos’ expectations for advancing but volatile equity markets and economic recovery.
All About Convertible Securities
Our Convertible Securities: Structures, Valuation, Market Environment and Asset Allocation guide is a resource on how convertible bonds work. It’s written by Calamos Founder, Chairman and Global Chief Investment Officer John P. Calamos, Sr.
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 four of the last 10 years.
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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Investment professionals, do you wish you had done more in convertibles earlier this year? If so, it's not too late to consider now. Calamos Convertible Fund can be a core portion of your equity allocation, offering attractive risk/reward attributes to help navigate equity markets.
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What do we see ahead? Investment professionals are invited to join a series of conference calls with the Calamos Investment Management team providing perspectives on their respective domains, including convertibles, liquid alternatives, U.S. and international /emerging markets equities, and fixed income.
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Global convertible issuance has soared in 2020, and the Global Convertibles Fund has outperformed both its index and global equities year-to-date.
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Here’s why we call the market neutral fund category leader both consistent and resilient.
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Calamos Founder, Chairman and Global Chief Investment Officer John P. Calamos, Sr. comments on Calamos Convertible Fund (CICVX), its prospects for the second half of the year and the convertible market in general.
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It’s volatile, uncertain markets like these that Calamos’ risk-managed approach anticipates. Managing volatility is our specialty, as demonstrated by fund performance in the first half of 2020.
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Inflationary expectations? This is yet another scenario where we like convertibles as a means of potentially shielding clients from the corrosive effect that inflation can have on fixed income investments.
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Equity volatility—whether in big or small moves—can be relentless. While they pursue varied strategies and produce varied outcomes, the goal of our risk-managed equity funds is to help mitigate the effect of the downside risk of equity investing.
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For the specialists actively managing the Calamos convertible-using funds, new issuance provides additional opportunities to rebalance risk profiles—and that’s the critical piece in the potential for your clients to benefit from convertible exposure.
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Our team has considerable experience sourcing opportunities through all phases of the market cycle. But at certain points of time, market conditions create an additionally attractive backdrop for our active long-term approach. As of the end of the first quarter (March 31, 2020) and despite recent retrenchment, equities are cheaper, credit spreads are wider, and convertible valuations are lower since the market decline related to the COVID-19 crisis began.
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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 CIO Conference Call series continues featuring members of the Calamos Investment Team with fresh market perspectives.
Investment Team Voices Blog: Converts
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We believe the case for allocations to emerging markets is very compelling, but current conditions heighten the need for risk-aware approaches. The freedom to invest opportunistically in convertible securities, a core capability of Calamos Investments, is a key differentiator of CNWIX’s dynamic approach—and one which has contributed favorably in 2020.
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Convertible security strategies can be an attractive choice for an asset allocation core because they lessen the need to make a timing call about the stock market, interest rates or economic recovery, explains John P. Calamos, Sr., Founder, Chairman and Global Chief Investment Officer of Calamos Investments.
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John P. Calamos, Sr. explains why it makes sense to stay invested through uncertainty. There are variety of ways to potentially reduce the equity exposures in a portfolio without going to cash—for example, by including risk-managed liquid alternative and convertible security strategies.
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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.
@Calamos on #Converts
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From @JohnPCalamosSr: A perspective on #convertiblesecurities #global #smallcap #fixedincome #multi-asset and #liquidalts opportunities in rising but volatile #markets ahead bit.ly/2PdHlAN
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Is it too late for #convertiblesecurities? Great question, glad you asked. Here’s our answer: bit.ly/2Dj5vag #activemanagement
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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