Calamos Phineus – A Top Performing Global Long-Short Fund

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Calamos Phineus – A Top Performing Global Long-Short Fund

August 9, 2016

by Robert Huebscher

The Calamos Phineus Long/Short Fund (CPLSX) seeks strong risk-adjusted and absolute returns across the global equity universe. It has outperformed its S&P 500 benchmark by over 300 basis points annually over the last decade.

The fund uses a global long-short strategy to invest in publicly listed equity securities. It uses a fundamental global approach to blend top-down and bottom-up considerations. It employs flexible asset allocation that allows for all investment styles, market caps and geographic regions depending on the market environment. Its comprehensive approach assesses stock, industry, style, country and market factors.

Michael Grant is a senior vice president and senior co-portfolio manager at Calamos. He has final responsibility for portfolio management and investment research for the Calamos Phineus strategy.

I spoke with Michael on July 29 in London.

You are fairly new to Calamos having joined in 2015. What was your background in the investment industry and what led you to join Calamos?

I entered the money management industry in the mid-1980s and have been managing institutional equity portfolios for more than 30 years. I was primarily with Schroders, where I worked in Asia as a portfolio manager for five years. Then I worked for Schroders in London for eight years before coming to the U.S. in 2001.

Until 2002, when I launched the Calamos Phineus Long/Short Fund, my background was entirely long-only. I transitioned to long/short in 2002 when I launched this strategy. I viewed long/short as a more attractive structure for delivering risk-adjusted returns.

The reason I joined Calamos, first and most obviously, is that it has a depth of resources that’s really impressive and particularly strong on the client-facing side.

But Calamos also gets what I do. The bulk of Calamos’ other products are centered on the idea of risk-adjusted alpha. The history of Calamos is heavily focused on convertibles. A convertible is a bond with an equity option and thus, has a similar profile as hedged equity.

As you mentioned, you manage the Calamos Phineus Long/Short Fund (CPLAX). What is the mandate of that fund?

Its mandate is to generate the long-term upside that is available from equities but with less downside risk. Without question, equities deliver a superior return over the long term because ultimately you are taking risk and you are paid for that risk.

But at the same time, many clients are unable to hold their nerve, so to speak, through periods of volatility. An equal part of our mandate is minimizing the downside through those extreme moments in equity markets. In effect, our mandate is to get the bulk of the upside during bull markets, but less of the downside during bear markets.

Over the last 10 years, data from Morningstar shows that your fund’s annualized return was 10.94%, versus 7.83% for the S&P 500 total-return index. What have been the key contributors to the fund’s outperformance?

An important part of our process is our understanding of the risk regime in which we operate. If we understand the risk regime, it gives us a strong sense of whether we are properly paid to engage risk. Pre-2008 for example, investors were rarely paid to take risk in the sense that one unit of risk did not necessarily produce one unit of return. Post-2008 of course, the reverse became apparent. If we took a unit of risk we generated more than one unit of return.

One feature of our track record over 15 years has been our ability to generate those returns through some very different market environments both in terms of the bull and bear moves.

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