Calamos Addresses FA Demand for Principal Protection

Calamos Addresses FA Demand for Principal Protection

Index-tracking ETFs promise 100% principal protection in exchange for upside caps.

Wealth Management Editor
Reviewed by: Staff
Edited by: James Rubin

Responding to demand from financial advisors, Calamos Investments has filed to increase access to its new suite of structured protection ETFs by switching the issuance cadence of its S&P 500 Index tracking strategy to monthly from quarterly.

The May 1 debut of the Calamos S&P 500 Structured Alt Protection ETF (CPSM) saw 1.45 million shares trade on the first day, with assets climbing to over $100 million in about a week. CPSM performance

CPSM, was originally designed to be issued quarterly in a rotation with structured protection ETFs tracking the Nasdaq 100 Index and the Russell 2000 Index, which means the next S&P 500 version wouldn’t be available until August.

The next S&P 500 version is now on track for a July 1 issuance and monthly thereafter.

“As S&P moved higher, we were getting calls from advisors asking if we could bring out the S&P 500 version more frequently than every quarter,” said Matt Kaufman, head of ETFs at Naperville, Ill.-based Calamos.

Options Strategy

The structured protection exchange-traded funds use an options strategy to mimic the performance of the underlying index while also providing 100% principal protection. In exchange for that downside protection, the strategy caps upside at a level that is published on the day of the issuance.

The upside cap on CPSM is 9.8%, but just like the downside protection, the structure is based on the net asset value of the ETF on the date of issuance and these ETFs are designed to be held for a full 12-month duration, after which they reset.

However, depending on how the underlying index is performing, there are opportunities to benefit from the structured protection structure throughout the 12-month life of the ETF.

“If you bought CPSM today, you would still get a 7% cap and 98% of the protection level,” Kaufman said.

While the suite of ETFs is not designed as short-term trading vehicles, Kaufman acknowledged that there are additional benefits to buying in if the net asset value falls below where it was on the issue date.

For example, if an investor bought May’s CPSM later this year after the S&P had gained 2%, that investor’s upside cap would only be around 7% and the downside protection wouldn’t kick in until the price dropped back to where it was in May.

However, buying in after the ETF had already experienced a decline of 2% would effectively lift the upside cap to around 11% with the downside protection capped at a level above the investor’s entry point.

While the schedule is changing for the structured protection ETF linked to the S&P 500, Kaufman said there are currently no plans to alter the schedule for the ETFs tracking the Nasdaq or Russell 2000.

Jeff Benjamin is the wealth management editor at, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.

Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.

Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.