ETFs
Calamos’ Kaufman Details Potential Benefits of Structured Protection ETFs
This article was originally published on ETFTrends.com.
When constructing a well-balanced portfolio, downside mitigation remains a critical factor to consider.
The series of Calamos Structured Protection ETF™ can provide investors with solid downside protection while generating upside potential. Matt Kaufman, senior vice president and head of ETFs at Calamos Investments, recently highlighted these products when he joined Vettafi Alternatives Symposium 2024.
He began by highlighting the many benefits of the Calamos Structured Protection suite. Kaufman noted that each ETF provides capped exposure to the S&P 500®, Nasdaq-100® or Russell 2000® markets.
This exposure comes with 100% downside protection over the one-year outcome period. Kaufman added that structured protection ETFs have tax alpha, calling the products “extremely tax efficient.”
Exposure to Nasdaq-100
Now let’s move on to the Calamos ETF which will be launched in June, the Calamos Nasdaq-100® Structured Alt Protection ETF™ – June (CPNJ), Kaufman highlighted the advantages of the Nasdaq-100. He notably touted the Nasdaq as being a broad index more focused on growth. He also added that the Nasdaq hit all-time highs in early May.
“One of the reasons I like Nasdaq as a 100% protection type product is that the dividend yield is applied to the capital appreciation potential. And so, the Nasdaq gives you very good upside opportunities,” Kaufman added.
Benefits of downside protection
When asked how downside protection works, Kaufman observed that current annuity products on the market offer similar protection features. With interest rates remaining where they are, he noted that investors are turning to safer products like CDs, principal protected notes and fixed index annuities.
“We have simply highlighted the benefits of these types of products, but put them in an efficient, tax efficient, liquid and transparent ETF package. So people can now access these types of products, but through the ETF,” Kaufman added.
Portfolio breakdown
Using the Calamos S&P 500® Structured Alt Protection ETF™ – May (CPSM) as an example, Kaufman then explained how these funds can fit into an investor’s portfolio. First, he said he sees structured protection ETFs like CPSM as an alternative to cash for investors. It should be noted that income generated from CDs is subject to ordinary income tax, while structured protection ETFs can generate significant tax alpha because potential gains will grow tax deferred and be taxed to long-term capital gains rates if held for the one-year outcome period. .
The story continues
“[A Structured Protection ETF] allows you to tie your cash to stock markets without greater downside risk,” Kaufman added.
Along with reducing the risks of exposure to stocks, he explained how a fund like CPSM can benefit retirees. While retirees face a multitude of investment hurdles, such as financial, longevity and volatility risks, Kaufman said a structured protection ETF “addresses all three risks.”
“You can basically outrun inflation and retirement, [and] overcome any expenses you might have from your wallet,” he added.
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Disclosure Information
Before investing, carefully consider the fund’s investment objectives, risks, charges, and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-866-363-9219. Read it carefully before investing.
An investment in the Fund(s) is subject to risks and you could lose money on your investment in the Fund(s). There is no guarantee that the Fund(s) will achieve its investment objective. Your investment in the Fund(s) does not constitute a deposit with a bank. It is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund(s) may increase during periods of significant market volatility. The Fund(s) also involve specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund’s prospectus.
*The Calamos Russell 2000 Structured Alt Protection ETFs are currently reflected in an initial filing with the SEC as Calamos Capital Protected Russell 2000 ETF.
Investing involves risks. A loss of capital is possible. The Funds face numerous market trading risks, including concentration of permitted holdings risk, cap change risk, capital protection risk, capped upside risk, cash holding risk, clearing member default risk, correlation risk, derivatives risk, equity securities risk, investment timing risk, large capitalization investment risk, liquidity risk, market maker risk, market risk, non-diversification risk, options risk, premium discount risk, secondary market trading risk, sector risk, tax risk, trading issues risk, risk underlying ETFs and valuation risk. For a detailed list of fund risks, see the prospectus.
Further information
There can be no assurance that the Fund will be successful in providing the protection sought. The results that the Fund seeks to provide can only be achieved if you hold shares on the first day of the results period. He can continue to hold them on the last day of the Result Period, which is approximately one year. There can be no assurance that the results of any results period will be realized or that the Fund will achieve its investment objective. If the Outcome Period has begun and the value of the Underlying ETF has increased, any appreciation of the Fund due to increases in the Underlying ETF since the beginning of the Outcome Period will not be protected by the protection sought, and an investor could incur losses until the underlying ETF returns to the original price at the start of the outcome period.
Shareholders of the Fund are subject to an upward return cap (the “Cap”) which represents the maximum percentage return an investor can obtain from an investment in the funds for the Outcome Period, before fees and expenses . If the Outcome Period has begun and the value of the Fund has increased to a level near the cap, an investor purchasing at that price has little or no ability to realize gains but remains vulnerable to downside risks. Additionally, the cap may increase or decrease from one outcome period to the next. The cap and the position of the Fund in relation to it should be considered before investing in the Fund. The Fund’s website, www.calamos.comprovides important information about the Fund as well as information relating to the potential results of an investment in a Fund on a daily basis.
Other information
These Funds are designed to provide point-to-point exposure to the price performance of the reference asset via a basket of flexible options. Therefore, ETFs are not expected to move directly in line with the reference asset during the interim period.
Investors who purchase stocks after an earnings period has begun may experience results that differ significantly from those of the fund’s investment objective. Initial outcome periods are approximately one year from the date the fund is established. After the initial results period, each subsequent results period will begin on the first day of the month in which the fund is established. After the conclusion of one results period, another will begin.
Risk related to FLEX options The Fund will use FLEX options issued and guaranteed for settlement by Options Clearing Corporation (OCC). In the unlikely event that the OCC becomes insolvent or is otherwise unable to meet its settlement obligations, the Fund could suffer significant losses. Additionally, FLEX options may be less liquid than standard options. In a less liquid market for FLEX options, the Fund may have difficulty closing out certain positions in FLEX options at desired times and prices. FLEX option values do not increase or decrease at the same rate as the reference asset and may vary due to factors other than the price of the reference asset.
Shares are bought and sold at market price, not net asset value (NAV), and are not individually redeemable from the fund. The net asset value represents the value of each stock’s share of the fund’s underlying assets and cash at the end of the trading day. Market price returns reflect the midpoint of the bid/ask spread at the close of trading on the exchange where the fund’s shares are listed.
100% capital protection is provided over a period of one year before fees and expenses. All limits are predetermined.
Capitalization Range – Maximum percentage return that an investor can obtain from an investment in the Fund if held during the Outcome Period. The cap range shown is the high and low cap rate over the last 15 trading days. The actual ceiling issued by the Fund may be different.
Protection Level – Amount of protection the Fund is designed to achieve over the remaining days.
Outcome Period – Number of days in the outcome period.
Nasdaq® and Nasdaq-100 are registered trademarks of Nasdaq, Inc. (which, together with its affiliates, the “Companies”) and are used under license by Calamos Advisors LLC. The Fund has not been conveyed by the Companies as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Companies. The companies offer no guarantees and assume no liability with respect to the Fund(s).
STRUCTURED ALT PROTECTION ETF and STRUCTURED PROTECTION ETF are registered trademarks of Calamos Investments LLC.
Calamos Financial Services LLC, distributor
Calamos Financial Services LLC
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866.363.9219 | www.calamos.com | caminfo@calamos.com
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Calamos and Calamos Investments are registered trademarks of Calamos LLC.
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