Calamos Wealth Administration was born out of Calamos Investments, which now has about $36 billion in complete property. Calamos’ historical past dates again to the Seventies when John P. Calamos Sr. based the agency. He began the group managing cash for family and friends, in addition to fellow Air Drive pilots; he was a fighter pilot in Vietnam.
Now, its RIA arm serves households with a mixed $3.75 billion in property. However the agency has formidable progress plans, in accordance with Jon Adams, senior vp and chief funding officer at Calamos Wealth Administration. That may possible be by way of a mix of natural progress, increasing pockets share with current purchasers and acquisitions.
Adams just lately spoke with WealthManagement.com in regards to the RIA’s tailor-made asset allocation method, 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 little 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 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 lot 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 consumer portfolios.
We’re utilizing non-public alts as properly, the place it is smart. In these we’re usually main with evergreen funds like tender provide or interval funds, though we additionally use drawdown funds for purchasers the place we expect it is applicable.
Inside the fairness bucket, we’re utilizing ETFs, mutual funds and SMAs. One profit that we’ve got being a part of the Calamos Investments group is that we’ve got a lot of internally run individually managed accounts that we’re utilizing for some consumer portfolios. These embody 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 provides us entry to a portfolio administration staff inside 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 consumer accounts the place we really feel it’s applicable. These are funds like our market impartial fund, convertibles, hedged fairness—the funds that we’re actually recognized for, lengthy distinguished monitor information, lengthy supervisor tenure, these kinds of elements. However then inside the particular person fairness buckets, I’d say we’ve got 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 for the reason that center of final 12 months.
WM.com: What does the fastened revenue portion appear like?
JA: For a taxable account, we’re usually incorporating presently roughly about half municipal bonds, half taxable bonds, relying on the buyers’ circumstances, equivalent 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 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 during the last couple of years. That’s been a technique to actually diversify the fixed-income publicity and portfolios and hold length down within the rising-rate atmosphere that we’ve seen.
WM.com: Do you maintain something in money?
JA: We’ve got a really small money allocation on the portfolio degree to cowl charges and bills, usually round 1% of the portfolio. We really feel that money is usually a drag over time. There’s a possibility 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 totally allotted within the portfolio.
WM.com: Does Calamos Investments run any various merchandise?
JA: On the general public various aspect, we’ve got a hedge fairness functionality, market-neutral and convertible bonds. We additionally launched a personal credit score interval fund a 12 months in the past with our companions at Aksia.
WM.com: Have you ever made any large funding allocation adjustments within the final six months to a 12 months? If that’s the case, what adjustments?
JA: We usually make between three to 6 tactical shifts per 12 months. We meet month-to-month as an funding committee assembly or extra often 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 by way of final 12 months. We stay modestly underweight relative to the Mixture Bond Index, however we did add considerably to length as we gained elevated confidence that charges had 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’d take tactical views. That progress versus worth, for instance, is completed by way of 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 got to inner portfolio managers and inner capabilities is one. Secondly, the way in which 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 looking for so as to add worth for particular person purchasers.
WM.com: Do you assume 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 giant tactical views usually; we’re usually taking modest views, attempting so as to add worth on the margin in portfolios, however we’ve got a buttoned-up danger administration course of guaranteeing that we’re not deviating too removed from the bands that we’ve got for portfolios for a person investor.
One other differentiator is our use of Calamos’ structured safety ETFs. They are often regarded as a kind of structured observe from one perspective however with decrease charges and 100% draw back safety in the way in which 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 over a 1-year end result interval. 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 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 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 inventive from a product perspective on trying to advance our answer set for our purchasers.
WM.com: Do you employ 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 got an funding committee inside the RIA incorporating a lot of members throughout the group. We’ve got a supervisor analysis committee sitting within the funding committee, however I’d say it’s first a operate of our asset allocation determination. That’s the place the extent one determination is.
Then the second degree is absolutely how we implement that view in portfolios by way of which supervisor, however we’d usually conduct a display screen once we’re trying so as to add a supervisor and a brand new functionality, usually by way of 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 by way of these methods intimately, after which recommending one explicit supervisor for our funding committee to vote on for inclusion on our accredited listing. 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 property. We’re exploring the house, conducting evaluation, and figuring out whether or not it doubtlessly is smart for some consumer portfolios. A few of our purchasers do maintain digital property in accounts of their very own, however presently no capabilities on our accredited listing.
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 consumer preferences, and we do have an ESG staff with an extended 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.
