Convertibles and High Yield - Capital Linkforums.capitallink.com/cef/2011/pres/calamos.pdf · 2011....
Transcript of Convertibles and High Yield - Capital Linkforums.capitallink.com/cef/2011/pres/calamos.pdf · 2011....
As of 9/30/08As of 9/30/08
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Capital Link Forum, April 27, 2011
Convertibles and High Yield
John P. Calamos, Sr.CEO and Co-Chief Investment Officer
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The Market Cycle and Convertible Characteristics
Equity-sensitive securities
Downside protection features
Benefit from volatility
As of 3/31/11CONVERTIBLE UNIVERSE*
*Source: BofA Merrill Lynch, All U.S. Convertibles Index (VXA0)
Distressed Hybrid CharacteristicsFixed Income Characteristics
Equity Characteristics
Investment Value (Bond)
YIELD ALTERNATIVES TOTAL RETURN ALTERNATIVES EQUITY ALTERNATIVES
3/1/2000 18.9% 27.8% 53.3%
02/28/2009 67.4% 20.9% 11.7%
3/31/2011 32.4% 41.3% 26.3%
Convertible Fair Value Price Track
CURRENT STOCK PRICE
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U.S. Convertible MarketAs of 3/31/11
Source: BofA ML Convertible Research, VXA0 Index, VNEW Index Credit Quality — Reflects the lower of the ratings of Standard & Poor’s Corporation and Moody’s Investors Service, Inc. and areadjusted to the scale shown. Ratings are relative, subjective and not absolute standards of quality.
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U.S. Convertible Issuance
Source: BofA Merrill Lynch Convertibles Research
Annual U.S. Convertible IssuanceIn billions
35.2 39.1
60.9
106.4
55.4
87.6
48.239.4
70.8
95.5
58.3
37.7 33.8
-29.5-36.8
-58.9
-28.6-35.9
-59.2
-74.6
-58.2
-81.0 -75.0 -78.2-68.0
-54.9
-$100
-$50
$0
$50
$100
$150
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Issuance Redemptions
Net Net Net Net Net Net Net Net Net Net Net Net Net5.7 2.3 2.0 77.8 19.5 28.4 -26.4 -18.8 -10.2 20.5 -19.9 -30.3 -21.1
As of 12/31/10
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Convertible Universe – Performance by QualityAs of 3/31/11
Source: BofA ML Convertible Research, VXA1 Index and VXA2 Index5
Convertible Market Performance by Credit Quality As of 3/31/11
Credit Quality Tiers — Reflects the higher of the ratings of Standard & Poor's Corporation; Moody's Investors Service, Inc.; Fitch, Inc. and National Association of Insurance Commissioners (NAIC) and are adjusted to the scale shown. Ratings are relative, subjective and not absolute standards of quality. Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. Unmanaged index returns assume reinvestment of any and all distributions and do not reflect fees, expenses or sales changes. Investors cannot invest directly in an index. Performance shown for the BofA Merrill Lynch Global Convertible Index. Source: Calamos Advisors, LLC.
-16.27%-22.27% -21.17%
-38.48%
-45.62%-52.65%-60%
-40%
-20%
0%
AA A BBB BB B CCC
Returns for the BofA ML Global Convertible Index by Credit Quality Tiers: 2008 – YTD 2011
10.96%19.78%
39.51%52.81%
60.64%
111.70%
0%
40%
80%
120%
AA A BBB BB B CCC
-5.28%
7.46% 8.98%
17.43% 18.80%
30.69%
-20%
0%
20%
40%
AA A BBB BB B CCC
2008 2009
2010
3.17% 4.45% 3.94% 4.75%
12.66%
-2.27%
-10%
0%
10%
20%
AA A BBB BB B CCC
YTD 2011
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Credit Default Rates
Source: Standard & Poor's 2009 Annual Global Corporate Default Study And Rating Transitions, March 17, 2010, p. 60
0.24% 0.41% 0.53% 0.82% 1.34%2.70%
6.26%
9.86%
27.98%
0%
5%
10%
15%
20%
25%
30%
BBB BBB- BB+ BB BB- B+ B B- CCC/C
GLOBAL CORPORATE AVERAGE DEFAULT RATES BY RATING MODIFIER: ONE YEAR AFTER ISSUANCE1981 - 2009
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The Current Convertible Market: The Valuation Anomaly
Source: Calamos Corporate System (CCS), Calamos Advisors LLC. Please note that the above chart has been derived from CCS, a proprietary valuation system designed and maintained solely by Calamos. While we deem the above information to be reliable, Calamos makes no public claims as to the validity of the information derived from the system.
Convertible Market: Fair Value EstimateJanuary 31, 1990 to December 31, 2010
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Global Convertible Market
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Global Convertible MarketAs of 3/31/10
* African/Eastern European regions are not included before 2004 due to limited data availability. Source: BofA ML Convertible Research, G300 Index. 10
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Global Convertible Issuance by RegionAs of 12/31/10
Source: BofA Merrill Lynch Convertibles Research
2005 2006 2007 2008 2009 2010
Issuance (in bill.) % of total
Issuance (in bill.) % of total
Issuance (in bill.) % of total
Issuance (in bill.) % of total
Issuance (in bill.) % of total
Issuance (in bill.) % of total
Asia (ex-Japan) $7 10% $12 10% $24 14% $8 9% $9 11% $13 18%
Europe $14 20% $14 12% $33 19% $15 17% $29 35% $18 25%
Japan $2 3% $10 8% $4 2% $5 6% $3 4% $4 6%
U.S. $48 68% $78 66% $104 60% $61 68% $39 47% $34 48%
Others $0 0% $3 3% $8 5% $2 2% $3 4% $2 3%
Total $71 $118 $174 $90 $83 $71
Convertible Issuance by RegionIn USD
Percentages may not add to 100% due to rounding.
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Global Convertible Market
Source: BofA ML Convertible Research - G300 Index. 12
As of 3/31/11
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High Yield Market
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High Yield Market Performance
High-yield bonds and loans outperformed most fixed income products in 1Q11
14Source: Acciavatti, Peter D., Tony Linares, Nelson Jantzen, CFA, and Alisa Meyers. "High-Yield Market Monitor, Global High Yield and Leveraged Loan Research." J.P.Morgan (2011). Print.
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High Yield New Issuance
HIGH YIELD NEW-ISSUE VOLUMEJANUARY 2009 - MARCH 2011
Source: Acciavatti, Peter D., Tony Linares, Nelson Jantzen, CFA, and Alisa Meyers. "High-Yield Market Monitor, Global High Yield and Leveraged Loan Research." J.P.Morgan (2011). Print. 15
HIGH YIELD NEW-ISSUE VOLUME1988-1Q 2011
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High Yield Spreads
16Source: Acciavatti, Peter D., Tony Linares, Nelson Jantzen, CFA, and Alisa Meyers. "High-Yield Market Monitor, Global High Yield and Leveraged Loan Research." J.P.Morgan (2011). Print.
SPREAD BETWEEN INVESTMENT-GRADE AND HIGH-YIELD BONDS
SPREAD TO WORST BY RATING
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U.S. Convertible and High Yield IssuanceAs of 12/31/10
Source: BofA Merrill Lynch Convertibles Research and JP Morgan
Annual U.S. Convertible and High Yield New Issue VolumeIn billions
35 39
61
106
55
88
4839
71
96
5838 34
151
100
47
95
68
152 158
106
149 148
53
181
302
$0
$50
$100
$150
$200
$250
$300
$350
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Convertible Issuance U.S. High Yield Issuance
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Credit Quality Tiers — Reflects the higher of the ratings of Standard & Poor's Corporation; Moody's Investors Service, Inc.; Fitch, Inc. and National Association of Insurance Commissioners (NAIC) and are adjusted to the scale shown. Ratings are relative, subjective and not absolute standards of quality. VNEW Index Credit Quality — Reflects the lower of the ratings of Standard & Poor’s Corporation and Moody’s Investors Service, Inc. and are adjusted to the scale shown. Ratings are relative, subjective and not absolute standards of quality.BofA Merrill Lynch All U.S. Convertibles Ex Mandatory Index (V0A0) — The BofA Merrill Lynch All U.S. Convertibles Ex Mandatory Index (V0A0) represents the U.S. convertible market excluding mandatory convertibles. MSCI World Index (USD) — The MSCI World Index (USD) is a market capitalization weighted index composed of companies representative of the market structure of developed market countries in North America, Europe, and Asia/Pacific region. S&P 500 Index — The S&P 500 Index is generally considered representative of the U.S. stock market. Value Line Convertible Index — The Value Line Convertible Index is an equal weighted index of the largest convertibles.
The information in this report should not be considered a recommendation to purchase or sell any particular security. Before investing carefully consider each fund's investment objectives, risks, charges and expenses. Please see each fund's prospectus containing this and other information or call 800-582-6959. Read it carefully.
Calamos Financial Services LLC, Distributor2020 Calamos CourtNaperville, IL [email protected]
© 2010 Calamos Holdings LLC. All Rights Reserved.Calamos®, Calamos Investments® and Investment strategiesfor your serious money® are registered trademarks ofCalamos Holdings LLC.
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