Calamos Wealth Administration was born out of Calamos Investments, which now has about $36 billion in complete 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 vp and chief funding officer at Calamos Wealth Administration. That may probably be via a mixture of natural progress, increasing pockets share with present purchasers and acquisitions.
Adams just lately spoke with WealthManagement.com in regards to 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 every thing in a really personalized approach 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 consumer, however I can positively communicate broadly so far as how we take into consideration a extra balanced sort of allocation.
For us, a 60/40 portfolio is extra like a 50/30/20 portfolio, with about 50% in equities, 30% fastened earnings, and 20% in options. Our heritage is as a liquid alts supervisor, so we incorporate numerous 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 consumer portfolios.
We’re utilizing non-public alts as properly, the place it is sensible. In these we’re sometimes main with evergreen funds like tender provide or interval funds, though we additionally use drawdown funds for purchasers the place we predict it is acceptable.
Inside the fairness bucket, we’re utilizing ETFs, mutual funds and SMAs. One profit that we’ve being a part of the Calamos Investments group is that we’ve numerous internally run individually managed accounts that we’re utilizing for some consumer portfolios. These embody a U.S. massive cap technique, worldwide fairness technique, municipal bond technique, in addition to a company bond technique.
WM.com: What are the advantages of utilizing these inside 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 provides us entry to a portfolio administration crew 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 many others.
We do selectively use Calamos funds in some consumer 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 recognized for, lengthy distinguished monitor data, lengthy supervisor tenure, these sorts of components. However then throughout the particular person fairness buckets, I’d say we’ve 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 earnings portion appear like?
JA: For a taxable account, we’re sometimes incorporating at present roughly about half municipal bonds, half taxable bonds, relying on the traders’ circumstances, corresponding to tax bracket. We use a core fastened earnings supervisor and complement that with the plus sectors, so areas like corporates and excessive yield as properly.
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 over the past couple of years. That’s been a approach to actually diversify the fixed-income publicity and portfolios and hold period 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 degree to cowl charges and bills, sometimes round 1% of the portfolio. We really feel that money generally is a drag over time. There’s a possibility to lock in comparatively excessive charges in fastened earnings. So if we do have purchasers which have the next money steadiness, we’re encouraging them to get totally allotted within the portfolio.
WM.com: Does Calamos run any various merchandise?
JA: On the general public various aspect, we’ve a hedge fairness functionality, market-neutral convertible bonds. On the non-public various aspect, we did launch a non-public 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 modifications within the final six months to a 12 months? In that case, what modifications?
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 continuously 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 period halfway via final 12 months. We stay modestly underweight relative to the Combination Bond Index, however we did add considerably to period as we gained elevated confidence that charges have been nearing a peak.
WM.com: What’s the combo of energetic versus passive within the portfolio?
JA: We don’t suppose 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 earnings, for instance. We’re utilizing passive extra in U.S. massive cap in addition to areas the place we would take tactical views. That progress versus worth, for instance, is finished via ETF publicity. We’re energetic in our high-yield publicity as properly.
WM.com: What differentiates your portfolio and funding philosophy?
JA: The entry we’ve to inside portfolio managers and inside capabilities is one. Secondly, the best way we use options in portfolios, each on the liquid aspect in addition to on the non-public aspect, 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 in search of so as to add worth for particular person purchasers.
WM.com: Do you suppose that’s roughly than different companies do in a 12 months?
JA: That’s most likely greater than most companies are implementing. We’re not taking extraordinarily massive tactical views sometimes; we’re sometimes taking modest views, making an attempt so as to add worth on the margin in portfolios, however we’ve a buttoned-up danger administration course of making certain that we’re not deviating too removed from the bands that we’ve for portfolios for a person investor.
One other differentiator is our use of Calamos’ structured safety ETFs. They are often considered a sort of structured notice from one perspective however with decrease charges and 100% draw back safety in the best way they’re structured.
These are Calamos ETFs which were 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 per 30 days for the subsequent 12 months.
These are choices for purchasers who’ve massive money allocations, are near retirement, or is likely to be trying to take some chips off the desk given robust fairness market efficiency.
WM.com: Does the RIA have any form of affect over the merchandise that come out of the asset administration aspect?
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 artistic from a product perspective on trying to advance our answer 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 properly.
WM.com: What’s your due diligence course of for selecting asset managers?
JA: We’ve an funding committee throughout the RIA incorporating numerous members throughout the group. We’ve a supervisor analysis committee sitting inside the funding committee, however I’d say it’s first a perform of our asset allocation choice. That’s the place the extent one choice is.
Then the second degree is de facto how we implement that view in portfolios via which supervisor, however we’d sometimes conduct a display screen after we’re trying 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 specific supervisor for our funding committee to vote on for inclusion on our authorized checklist. That’s the identical process for inside 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 sensible for some consumer portfolios. A few of our purchasers do maintain digital belongings in accounts of their very own, however at present no capabilities on our authorized checklist.
WM.com: Are you incorporating ESG into the portfolio? In that case, how?
JA: We do have fashions that incorporate ESG and sustainable investing relying on consumer preferences, and we do have an ESG crew with a protracted monitor report inside Calamos Investments.
WM.com: Does Calamos have ESG merchandise?
JA: Sure, mutual funds and ETFs. We use these selectively in consumer portfolios.
