Written by Nick Ackerman, co-produced by Stanford Chemist

Calamos is a relatively smaller fund sponsor, with total assets under management of around $20 billion. Within the closed-end fund space, they offer 7 funds in total. Launching their 7th fund just in the end of 2019. However, Calamos isn’t new to the asset management space, as they were formed in 1977. Their niche is convertible securities and they also have a global presence. This particular area of focus is apparent as all of their funds offer some varying exposure to the investment structure.

Similar to other convertible funds, they don’t have any that is invested 100% in convertibles. Instead, focusing on a mixture of equities and other fixed-income investments into their portfolios. They also categorize their funds in four distinct categories; global total return, U.S. total return, global enhanced fixed-income and U.S. enhanced fixed-income. With this lineup, an investor interested in any exposure to convertible securities can probably find a fund worth exploring at Calamos.

(Source – Calamos)

The funds have done relatively well on a YTD NAV total return basis. As well as they can do in a year of a pandemic. Keep in mind that all the funds have their highest allocation to the tech sector in varying degrees. This means they have been invested in a very favorable sector throughout 2020, so factor that in.


Data by YCharts

We do see a particular lag in performance with their fund Calamos Long/Short Equity & Dynamic Income Trust (CPZ) on a YTD NAV total return basis. As a long/short fund, this tends to happen. Especially as there is volatility and the markets get whipped back and forth. They tend to be on the wrong side of things. Additionally, there is a biased uptrend in the market over time as we gravitate higher. This means that the short side of their portfolio has historically, and will more than likely, always be a drag. What CPZ might be good for is being used as a trading fund.

Further takeaway from the chart above isn’t necessarily useful as far as true comparisons to each other. That is because each fund carries a distinctly different portfolio. Choosing one fund over the other based purely on this year’s NAV total return is unwise. Digging into the funds, we can break down where each could potentially fit into one’s portfolio.


Calamos Long/Short Equity & Dynamic Income Trust

They highlight CPZ as a “cornerstone long/short equity strategy – a first in the listed U.S. closed-end fund space – and a fixed-income strategy work together to access global opportunities.” As we see discussed above, not necessarily the greatest place to be if you are a buy and hold investor, in my opinion.

The fund is also structured as a term fund. That means they intend to liquidate at the end of a certain amount of years. For CPZ, this comes after the twelfth year or in 2031.

As a long/short fund, they highlight their largest long positions and their largest short positions.

(Source – CPZ Fund Website)

As we can see, the fund was almost short the SPDR S&P 500 ETF (SPY) by 20%. This is huge and was likely causing the significant weakness we have seen in performance. At the very least, it was a contributing factor to its negative performance for the year. Additionally, the fund is long on industrials, energy and financials as their largest sector as of the same period.

CPZ is at an extreme discount of 14.06%, but as their performance is, it might be warranted. They utilize leverage and have a total expense ratio of 2.32%. Though, that is including leverage and short interest expenses. Factoring those out and we arrive at an expense ratio of 1.85%. That is quite high and the highest among the Calamos funds.

(Source – CEFConnect)

This fund is better left to shorter-term investors that want to protect on the downside. However, even in the latest downturn, it wasn’t necessarily able to do even that on a NAV basis. That is why I have not really done coverage on this fund, with a long/short investment policy it is difficult to come out ahead. They have to be right every single time to be successful. In a long-only fund, you are biased toward upward market movements. For investors that do want to venture into this fund, you can pick up an 8.39% distribution rate though – that is certainly attractive.

Calamos Global Total Return Fund (CGO)

The fund “seeks total return through a combination of capital appreciation and current income by investing in a globally diversified portfolio of equities, convertible securities and high yield corporate bonds.”

This fund currently has a tilt towards more of an equity/convertible portfolio.

(Source – Fund Fact Sheet)

This does generally tilt the fund towards a more aggressive position. Which generally lends itself to some greater returns. As a global fund, this has tempered its performance. I would still say we are looking at respectable numbers. Over the last 10-years, they have been able to put up a total NAV return of 7.75%, with total price returns of 8.14%. As we know, price returns outperforming NAV returns leads to eventual premium pricing. This is certainly the case with CGO, the fund last closed at a premium of 4.79%.

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Historically speaking, this isn’t even out of the ordinary though. The 1-year z-score is actually negative even.

(Source – CEFConnect)

The global exposure also led to this fund performing in the middle of the pack to the rest. This fund might be most appropriate for an investor that is looking for convertible exposure, with a lean towards global equities. The premium doesn’t seem warranted. Though the 9.62% distribution rate is enticing, it does seem elevated coming in as the second-highest yielding Calamos fund.

As a fund that uses 31% leverage, you can expect to pay an expense ratio of 2.05% on managed assets. Leaving interest expenses out of it, you arrive at paying a 1.21% expense ratio on managed assets (1.76% on net assets). One final caution, the fund’s total managed assets are at $143 million – making this a small fund with potential liquidity issues if a large investor wanted to exit. Overall, I would probably personally avoid this one at this time.

Calamos Dynamic Convertible and Income Fund (CCD)

This fund “can invest in convertible and other fixed-income securities with the aim of generating a high level of total return through a combination of capital appreciation and income. To help generate income and attempt to achieve a more favorable reward/risk profile, the fund’s investment team also has the flexibility to sell options.”

This fund is a bit different than the rest in that they are the closest to being a pure-play convertible investment.

(Source – Fund Fact Sheet)

This fund is categorized by them as their U.S total return fund as well. Combining that with a total managed asset portfolio of almost $800 million (on 30% leverage) and you arrive at one of the lowest expense ratios for the Calamos lineup that you can get. Even including interest expense, we come out at 1.88% on managed assets, excluding that and we are at a reasonable 1.07% on managed assets (1.61% on net assets).

Additionally, the fund is trading at a very reasonable valuation at an 8.37% discount.

(Source – CEFConnect)

That puts it at an attractive level more recently, though the fund has traded at deeper discounts in the past. Thanks to that steep discount currently, the fund’s NAV distribution rate is 8.10%, while an investor gets to collect 8.84%.

CCD might be one of the closer pure-play convertible funds in the CEF space. That means it could interest an investor that really wants to put a focus and increase their exposure to the convertible space. In the last 5-year period, we have a total NAV return of 10.23% and total share price returns of 9.39%. That is quite respectable for a hybrid investment type that you get with convertibles.

Calamos Total Return Fund (CSQ)

The only Calamos fund I’ve owned and have ever owned. This is another one of their funds categorized as U.S. total return. In this case, they “seek to offer investors an attractive monthly distribution while offering equity participation. The Fund invests in a diversified portfolio of primarily U.S. equities, in addition to convertible securities and high-yield securities.”

This allows them flexibility in managing their fund. As they highlight, “the allocation to each asset class is dynamic and reflects our view of the economic landscape and the potential of individual securities.”

(Source – Fund Fact Sheet)

Since I’ve held the fund for several years, it has primarily been tilted towards holding equities – this continues to be true today. This does mean that returns have been favorable as equities have dominated over the past 10-years. This was during the longest bull market in history. 10-year returns come in at a total NAV return of 12.70%. The total share price return comes in at a whopping 14.05%. Even further, this fund has been around for a while, they provide 15-year annualized returns as well. The fund has an inception date of March 26th, 2004. 15-year total NAV returns come in at 7.98%, with total share price returns coming in at 8.26%.

For CSQ, we are at an expense ratio of 1.05% on managed assets (1.54% on net assets). Adding in the additional costs for leverage expense and we come to 1.83% on managed assets. The fund is quite large, at almost $2.9 billion in total managed assets, on 32% leverage.

The primary downside to this fund is its valuation. Even during the crash, we didn’t get extreme discounts as we saw with many funds hitting 20-30%+ levels. The fund is currently sitting at a slim premium of 0.07%. On March 18th, 2020 it hit 17.61%, then quickly recovered to a single-digit discount (almost premium level) a week later. Historically, the fund has traded at steep discounts almost perpetually.

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(Source – CEFConnect)

Overall, I’ve been happy with this fund but it hasn’t allowed for too many buying opportunities to add to it over the last couple of years. So, for now, we just have to accept an 8.04% distribution.

Calamos Global Dynamic Income Fund (CHW)

Going back to the global investment tilt, we do see weak performance creep up again. The fund “is a globally enhanced fixed-income product that seeks to provide an attractive monthly distribution with a secondary objective of capital appreciation.”

Essentially, this fund is the counterpart to CSQ, except a focus on global securities.

(Source – Fund Fact Sheet)

Even with a focus on global positions, the fund was still able to put up some acceptable returns. Over the past 10-year period, we have total NAV returns of 9.79%, total share price returns of 10.89%. The returns on a shorter period of time are weaker though.

The expense ratio of the fund comes in at 1.10% on managed assets (1.63% on net assets) when including the 32% leverage this climbs to 2% on managed assets. This isn’t unreasonable levels at all, even for a global fund. It is sizable too, with just over $653 million in total managed assets.

This is another fund where the discount isn’t particularly attractive at this time. A little bit better than CSQ, but probably deservedly so. The fund is being a bit penalized for the weaker performance, I believe. The current discount is 1.08%. Same as CSQ above, this isn’t too attractive as historically it has traded at much steeper levels. This does make it hard to recommend currently.

(Source – CEFConnect)

What might get some investors excited is the current distribution rate though. They carry the banner of having the highest distribution rate of 10.81% right now. Since the discount isn’t that wide, the fund’s NAV distribution rate is similarly elevated at 10.45%. That makes it hard to believe that it is at a sustainable level without some more major recovery in its underlying holdings. Even as I’m looking to add to global positions due to valuations, it might seem hard to add to this fund without a deeper discount than at present.

Calamos Convertible & High Income Fund (CHY)

Admittedly, this is a fund I am particularly interested in and took a position in recently. “The fund is an enhanced fixed-income offering that seeks total return through a combination of capital appreciation and current income by investing in a combination of convertibles and high yield bonds. It provides an alternative to funds that invest exclusively in investment-grade fixed-income instruments, and it seeks to be less sensitive to interest rates by investing in lower duration asset classes.”

(Source – Fund Fact Sheet)

This fund provides fairly significant exposure to convertibles, while still having a hybrid allocation by mixing in mostly other fixed-income assets. For this, they have put up really respectable returns. Over 10-years, they have been able to produce a total NAV return of 9.95%, a total market return of 9.05%. Additionally, this fund has also been around for quite some time with an IPO date of May 28th, 2003. That means we have some 15-year annualized returns to look at 8.35% on a total NAV return basis, and for the total share price return basis, we come in at 7.42%.

Thanks to this lagging share price return, we arrive at a very attractive discount of 7.83%. On a 1-year z-score basis, this is coming in at -1.02. Even further, the history of this fund shows that it has traded at extreme discounts and extreme premium levels, both.

(Source – CEFConnect)

Even the 5-year average discount of the fund comes in at 2.76%. Which we are much wider at current valuations. One of the reasons I believe that investors might be shunning the fund is in 2018 they trimmed their distribution. The current monthly amount is $0.085, while prior to 2018 this was $0.10. However, the rate is quite enticing even now – the NAV distribution is a reasonable 7.76%, while shareholders are collecting 8.42%.

It is also the second-best performing fund this year. Which leads us to the second reason investors may be shunning the fund, the largest holding is Tesla’s (TSLA) convertible note due in 2024. As a convertible bond holding, it is tied to the underlying price of the common stock. Additionally, the top positions are also in many other tech-related convertible stocks; this isn’t much unlike several of their other funds though. So, based on the attractive valuation and enticing distribution yield, I am looking to enter a position. As a long-term investor, I can take whatever volatility can come from the fund.

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Plus, the fund is large at almost $1.3 billion in total managed assets – meaning liquidity to get out if I need to is unlikely to be a problem. The fund also only charges an expense ratio of 0.86% on managed assets (1.30% on net assets), including the 31% leverage this comes to 1.67% on managed assets. All of these factors lead to a buy in my book.

Calamos Convertible Opportunities & Income Fund (CHI)

Last, but not least, we have CHI. Similar to CHY, it is categorized as a U.S. enhanced fixed-income fund. They “seek total return through a combination of capital appreciation and current income by investing in a combination of convertible and high yield bonds.”

(Source – Fund Fact Sheet)

The fund is almost a mirror image of CHY above, reflected by their portfolio asset allocation. The fund is also a decent size at $1,183 billion in managed assets on a 31% leverage ratio. The expense ratio is the same at 0.86% on managed assets (1.30% on net assets), with total expense including interest coming in at 1.67% on managed assets. (I had to check I wasn’t looking at the wrong Fact Sheets!)

A bit of a difference is that it launched prior to CHY, with an IPO date of June 25th, 2002. The 10-year total NAV return comes in at 9.94% – a basis point of difference from CHY. The total market return for 10-years annualized is 8.81%. Additionally, the 15-year total returns come in at 6.38% for the share price and 8.04% for the NAV price. Which does put CHY just ever so slightly ahead of CHI. Even the discount is a similarly attractive 9.13%.

All this adds up to only being slightly less attractive than CHY, but certainly not by a large margin at all. In fact, within a day or two, the difference could be enough to tilt one in favor of the other.

(Source – CEFConnect)

Therefore, I would put CHI on the watchlist as a buy candidate at the moment. For holders already, they are getting paid an attractive 8.47% distribution.



In all, the Calamos lineup of funds is quite respectable. Except for CPZ, they have all done relatively well. CPZ as the newer fund, in fairness, does need a bit longer of a track record. I just find it hard to believe that it can do well given its long/short investment policy. The short side of its portfolio is generally likely to be a drag on performance over time. Essentially, it could be a good candidate for a downturn, which, they weren’t able to capitalize on in this particular experience. Though that doesn’t mean that CPZ’s management couldn’t in future sell-offs.

I personally own CSQ at the moment, I have enjoyed its steady distribution. They have been able to grow this distribution, too, since the GFC of 2008/09. However, its valuation isn’t the best for adding a significant amount at this time. For the buy candidates, I’m primarily looking at CHY and CHI. Both are offering enticing discounts, even historically speaking wider than usual over the longer term. Both have also been able to put up very respectable returns, with a primary emphasis on convertible securities. This is different than CSQ’s tilt towards heavier exposure to equities, that has been able to produce higher total returns. That shouldn’t be a surprise though as convertible securities offer features of both equities and fixed-income securities.

With that being said, all the Calamos funds have relied on having an overweight position in the tech sector. This has done exceptionally well this year. As it has done exceptionally well throughout the last 10-years+; this is thanks in part to the longest bull market in history. It doesn’t mean that they can’t continue to do well, just realize we might hit some volatile times with these funds.

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Disclosure: I am/we are long CSQ, CHY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article was originally published to members of the CEF/ETF Income Laboratory on July 26th, 2020.

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