Calamos Wealth Administration was born out of Calamos Investments, which now has about $36 billion in whole belongings. Calamos’ historical past dates again to the Nineteen Seventies when John P. Calamos Sr. based the agency. He began the group managing cash for family and friends, in addition to fellow Air Pressure pilots; he was a fighter pilot in Vietnam.
Now, its RIA arm serves households with a mixed $3.75 billion in belongings. However the agency has formidable progress plans, in line with Jon Adams, senior vice chairman and chief funding officer at Calamos Wealth Administration. That can probably be via a mixture of natural progress, increasing pockets share with current purchasers and acquisitions.
Adams lately spoke with WealthManagement.com concerning the RIA’s tailor-made asset allocation strategy, its mannequin portfolios and the way the agency’s asset administration possession advantages advisors.
The next has been edited for size and readability.
WealthManagement.com: What’s in your mannequin portfolio?
Jon Adams: We run all the things in a really personalized method right here at Calamos Wealth Administration. We don’t have, for instance, simply 5 mannequin portfolios for purchasers to select from. We customise every allocation for every particular person shopper, however I can positively communicate broadly so far as how we take into consideration a extra balanced kind of allocation.
For us, a 60/40 portfolio is extra like a 50/30/20 portfolio, with about 50% in equities, 30% fastened revenue, and 20% in options. Our heritage is as a liquid alts supervisor, so we incorporate a variety of diversifiers in our portfolios like infrastructure, convertible bonds, hedged fairness and market impartial. For liquid alts, we’re utilizing primarily mutual funds and ETFs.
However we’re incorporating each liquid and personal options in shopper portfolios.
We’re utilizing non-public alts as nicely, the place it is smart. In these we’re sometimes main with evergreen funds like tender supply or interval funds, though we additionally use drawdown funds for purchasers the place we expect it is acceptable.
Inside the fairness bucket, we’re utilizing ETFs, mutual funds and SMAs. One profit that we now have being a part of the Calamos Investments group is that we now have a variety of internally run individually managed accounts that we’re utilizing for some shopper portfolios. These embrace a U.S. giant cap technique, worldwide fairness technique, municipal bond technique, in addition to a company bond technique.
WM.com: What are the advantages of utilizing these inner SMAs versus others?
JA: Primary, it’s cheaper. We’re not charging a administration charge to make use of our personal SMAs, solely an advisory charge. After which secondly, it offers us entry to a portfolio administration workforce throughout the group. We’ve had calls with purchasers the place our fairness portfolio supervisor or our municipal bond PM will get on with particular person purchasers, give them an replace so far as the place they see alternatives, give them an replace within the markets, and so forth.
We do selectively use Calamos funds in some shopper accounts the place we really feel it’s acceptable. These are funds like our market impartial fund, convertibles, hedged fairness—the funds that we’re actually identified for, lengthy distinguished observe information, lengthy supervisor tenure, these sorts of components. However then throughout the particular person fairness buckets, I might say we now have some core mutual fund holdings. We additionally complement these with ETFs, for instance, progress and worth ETFs. We use these to additionally take tactical tilts in portfolios. Proper now, we’ve had a modest progress tilt in portfolios because the center of final 12 months.
WM.com: What does the fastened revenue portion seem like?
JA: For a taxable account, we’re sometimes incorporating presently roughly about half municipal bonds, half taxable bonds, relying on the traders’ circumstances, akin to tax bracket. We use a core fastened revenue supervisor and complement that with the plus sectors, so areas like corporates and excessive yield as nicely.
One notable differentiator is that we use a market-neutral fund as a fixed-income substitute. We’ve used that for a few quarter of our fixed-income publicity during the last couple of years. That’s been a method to actually diversify the fixed-income publicity and portfolios and preserve length down within the rising-rate surroundings that we’ve seen.
WM.com: Do you maintain something in money?
JA: We’ve a really small money allocation on the portfolio stage to cowl charges and bills, sometimes round 1% of the portfolio. We really feel that money is usually a drag over time. There’s a chance to lock in comparatively excessive charges in fastened revenue. So if we do have purchasers which have the next money steadiness, we’re encouraging them to get absolutely allotted within the portfolio.
WM.com: Does Calamos run any various merchandise?
JA: On the general public various facet, we now have a hedge fairness functionality, market-neutral convertible bonds. On the non-public various facet, we did launch a personal credit score interval fund a 12 months in the past with our companions at Aksia.
WM.com: Have you ever made any huge funding allocation adjustments within the final six months to a 12 months? If that’s the case, what adjustments?
JA: We sometimes make between three to 6 tactical shifts per 12 months. We meet month-to-month as an funding committee assembly or extra ceaselessly as market circumstances dictate. We did add that progress bias final 12 months. We additionally added high-yield bonds final fall. That’s been a worth add to portfolios as spreads have narrowed. After which one different tactical change that we made was so as to add length halfway via final 12 months. We stay modestly underweight relative to the Combination Bond Index, however we did add considerably to length as we gained elevated confidence that charges have been nearing a peak.
WM.com: What’s the combination of energetic versus passive within the portfolio?
JA: We don’t assume it is an either-or query. It’s being selective and intentional about the place you’re utilizing energetic administration. We use energetic administration in areas like U.S. small-cap, worldwide equities and core fastened revenue, for instance. We’re utilizing passive extra in U.S. giant cap in addition to areas the place we would take tactical views. That progress versus worth, for instance, is completed via ETF publicity. We’re energetic in our high-yield publicity as nicely.
WM.com: What differentiates your portfolio and funding philosophy?
JA: The entry we now have to inner portfolio managers and inner capabilities is one. Secondly, the best way we use options in portfolios, each on the liquid facet in addition to on the non-public facet, is one other. After which lastly, the tactical views we’re taking in portfolios, in a median 12 months, three to 6, relying on the chance set, the place we’re looking for so as to add worth for particular person purchasers.
WM.com: Do you assume that’s kind of than different corporations do in a 12 months?
JA: That’s in all probability greater than most corporations are implementing. We’re not taking extraordinarily giant tactical views sometimes; we’re sometimes taking modest views, attempting so as to add worth on the margin in portfolios, however we now have a buttoned-up danger administration course of making certain that we’re not deviating too removed from the bands that we now have for portfolios for a person investor.
One other differentiator is our use of Calamos’ structured safety ETFs. They are often regarded as a sort of structured be aware from one perspective however with decrease charges and 100% draw back safety in the best way they’re structured.
These are Calamos ETFs which have been launched on the S&P500, the NASDAQ and upcoming on the Russell 2000. However all of these ETFs have 100% draw back safety with upside as much as a cap. The primary of these was launched in Could, the second of these in June, and Calamos is launching one monthly for the following 12 months.
These are choices for purchasers who’ve giant money allocations, are near retirement, or is likely to be trying to take some chips off the desk given sturdy fairness market efficiency.
WM.com: Does the RIA have any type of affect over the merchandise that come out of the asset administration facet?
JA: Completely. We do have a seat on the desk so far as what merchandise Calamos Investments is trying to launch. A few of these discussions revolve round what purchasers are asking about, what purchasers are involved about, what gaps purchasers are involved about of their portfolios, after which it’s about actually being inventive from a product perspective on trying to advance our resolution set for our purchasers.
WM.com: Do you utilize direct indexing?
JA: We’re actively exploring direct indexing capabilities as we communicate. I’ll say the SMAs that we run internally are optimizing for tax loss harvesting, so we’re implementing tax loss harvesting all through these SMAs and are actively contemplating including on direct indexing functionality as nicely.
WM.com: What’s your due diligence course of for selecting asset managers?
JA: We’ve an funding committee throughout the RIA incorporating a variety of members throughout the group. We’ve a supervisor analysis committee sitting within the funding committee, however I might say it’s first a operate of our asset allocation resolution. That’s the place the extent one resolution is.
Then the second stage is de facto how we implement that view in portfolios via which supervisor, however we’d sometimes conduct a display once we’re wanting so as to add a supervisor and a brand new functionality, sometimes via Morningstar, flagging, say, 4 to 5 managers on common. Then we’re doing in-depth due diligence on these managers, assembly with them in individual, going via these methods intimately, after which recommending one explicit supervisor for our funding committee to vote on for inclusion on our permitted record. That’s the identical process for inner and exterior capabilities.
WM.com: Any curiosity in Bitcoin ETFs? Crypto?
JA: We don’t have something on our platform in Bitcoin or crypto or digital belongings. We’re exploring the area, conducting evaluation, and figuring out whether or not it probably is smart for some shopper portfolios. A few of our purchasers do maintain digital belongings in accounts of their very own, however presently no capabilities on our permitted record.
WM.com: Are you incorporating ESG into the portfolio? If that’s the case, how?
JA: We do have fashions that incorporate ESG and sustainable investing relying on shopper preferences, and we do have an ESG workforce with a protracted observe report inside Calamos Investments.
WM.com: Does Calamos have ESG merchandise?
JA: Sure, mutual funds and ETFs. We use these selectively in shopper portfolios.
