Calamos to Apply Convertible Bond Experience to New ETF

Calamos Investments is preparing its second exchange-traded fund, a convertible bond fund that seeks to use the investment manager’s deep experience and focus on a segment rarely tapped by the ETF industry. 

The fund follows the February offering of the Calamos Antetokounmpo Global Sustainable Equities ETF (SROI), which Calamos launched in partnership with Giannis Antetokounmpo, a two-time Most Valuable Player with the NBA’s Milwaukee Bucks called the “Greek Freak.”  

The proposed ETF will focus on convertible bonds, which are lightly covered by the ETF industry, with only four funds currently trading, according to etf.com data. Convertible bonds can be changed into shares of company stock, and are a primary focus of Naperville, Illinois-based Calamos’ business.  

“Convertible bonds are in our DNA,” said Matt Kaufman, head of ETFs for Calamos, which has $35 billion in assets under management. “We’ve been managing convertible funds for 45 years now, and we want to focus on something Calamos has an edge in.”  

The fund will focus on convertible bonds with a high “delta” value, meaning the price of the convertible bonds will have a high correlation with movements of the issuing company’s stock. This puts the fund at the higher end of risk and return for convertibles, and on the lower end for equities.  

While the ETF will not have a specific restriction on market cap, convertibles tend to be issued by small and midcap companies, so it will have the most exposure to that segment of the market.  

Calamos is seeking to offer investors “a risk-managed small or midcap product, a small- and mid-cap equity surrogate,” said Kaufman, a 20-year veteran of the ETF industry who helped build the options-based strategy that is used for defined outcome ETFs.  

The four convertible bond ETFs that trade in the U.S. have about $5 billion in assets in total. The overwhelming majority of ETF assets in the sector are in two index funds, the SPDR Bloomberg Convertible Securities ETF (CWB) and the iShares Convertible Bond ETF (ICVT), which have $3.9 billion and $1.2 billion, respectively.  

The managers of the Calamos convertible fund average 21 years in the industry, Kaufman said.  

As to why they’re launching now, he cites the growth of options ETFs, which have received $65 billion in inflows over the past three years, and convertible bonds offer similar opportunities through the option to convert to stock. Kaufman also sees a lack of awareness of convertible bonds as an option in the ETF space.  

While Calamos doesn’t have any new ETFs filed, it is looking into more convertible bond ETFs. “We’d consider three to five on the market over the next year or two a success,” noted Kaufman. 

Contact Gabe Alpert at [email protected]