Home etftrends.com Calamos’ Matt Kaufman Talks Structured Protection Strategies

Calamos’ Matt Kaufman Talks Structured Protection Strategies

At the beginning of May, Calamos debuted its series of Structured Protection ETFs with the launch of the Calamos S&P 500® Structured Alt Protection ETF™ – May (CPSM). Matt Kaufman, Calamos SVP and Head of ETFs, recently sat down with the VettaFi team to discuss the strategy behind the structured protection lineup.

Investor Benefits

What can a Structured Protection ETF offer to an investor?

We can now give you 100% protection with a cap to the market’s upside. And that cap right now is around 9.2 to 9.6%. It’s significant. And so, what’s your trade-off? If you think about your cash trade-off for a CD, [the CD market is worth about]$9 trillion. People are flooding into the CD market because they want that 5%. What happens after the push to pay tax on that? If you’re in the highest tax bracket, you pay 37% tax on your 5% investment.

Now, your guaranteed 5% is down to about 3.2%. That’s your opportunity. You can get a guaranteed 3.2% today, or if you buy this type of product, you can trade that in for the opportunity to get the upside of the S&P 500® up to 9.5%, with no downside risk over that one-year time period. It’s essentially the same downside risk as your cash products and as your fixed index annuities and your capital-protected notes. But you’ve got this upside opportunity to 9.5%.

Best/Worst Case Scenario

[In the] best case scenario, the market runs up, you get your 9.5%, [and]you’re happy.

Worst-case scenario: The market’s down. You end at 0% gross of fees, which are 69 basis points. [Then], you’ve spent 69 basis points, and your cash is [otherwise]fully protected.

This is all in the ETF wrapper, which is tax-deferred growth [until it’s sold]. If you had $100 to start with and the market goes up 9% [in the one-year outcome period], you capture that nine and then start your next outcome period. And [you’re] not starting with $100. [You’re] starting with $109, and so now I get another cap, starting at $109. You can end up in a significantly better place over time.

As far as applications go, we’re seeing people move cash off the sidelines into these types of products. People trading off their guaranteed 5% money market rate for the chance at market upside. The other idea is to de-risk equity exposure. Let’s say you were in the market, and the S&P 500 it’s run up. It’s at all-time highs. You want to de-risk. You want to take some risk off the table but not take everything off the table.

Portfolio Positioning

Where do the structured protection ETFs fit into a portfolio?

I think putting it in your equity sleeve may give you a better risk-adjusted return without having to sacrifice that 0% – 9.5% [potential return]. For retirees, retirees need to outpace inflation. They can’t afford to use the naked equity markets to do it. However, inflation moves positively through the equity markets over time. This gives them an opportunity to outpace inflation without having to take on the downside risk to do it.

Choosing Indexes

What made you pick these indexes, and do you think you’ll expand to cover other indexes? Are you just looking for the major equities?

I think when you’re capturing a category, you want to go after the broadest segments first. You’ll see that in our rollout. We’ve got the S&P 500 first, then the Nasdaq-100, then the Russell 2000. You want to build these products so that they can survive and grow to be really big, and you need to derive that liquidity from really large underlying markets, like the ones on which we’re launching these products. It’s a space that we’re looking at. If they keep growing, we’ll bring on other products, but we won’t want to sacrifice liquidity to do it.

Monthly Releases

What was the thought process behind the release schedule for these funds?

We want to give people an opportunity to get in every month. I think having one ETF to focus on can focus on sales efforts. It can focus an advisor’s efforts – they don’t have to sort through 100 products to see which has the best payoff profile. We can just say, okay, on May 1, we’re launching the S&P 500 version. June 3 is the first business day of June, and we’re launching the Nasdaq-100 version. And then, in July, we’re launching the Russell 2000 version. We will just repeat that cycle until we’ve got the entire series in the market.

At the time of this articles publication and in response to demand from financial advisors, the Calamos S&P 500 Structured Alt Protection ETF (CPSM) will be issued monthly instead of quarterly starting July 1.

For more news, information, and analysis, visit the Alternatives Channel.

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 can be no assurance that the Fund(s) will achieve its investment objective. Your investment in the Fund(s) is not a deposit in a bank and 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) can increase during times of significant market volatility. The Fund(s) also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund’s prospectus.

Investing involves risks. Loss of principal is possible. The Funds face numerous market trading risks, including authorized participation concentration risk, cap change risk, capital protection risk, capped upside risk, cash holdings risk, clearing member default risk, correlation risk, derivatives risk, equity securities risk, investment timing risk, large-capitalization investing 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, underlying ETF risk and valuation risk. For a detailed list of fund risks see the prospectus.​

Additional Information

There are no assurances the Fund will be successful in providing the sought-after protection. The outcomes that the Fund seeks to provide may only be realized if you are holding shares on the first day of the Outcome Period and continue to hold them on the last day of the Outcome Period, approximately one year. There is no guarantee that the Outcomes for an Outcome Period will be realized or that the Fund will achieve its investment objective. If the Outcome Period has begun and the Underlying ETF has increased in value, any appreciation of the Fund by virtue of increases in the Underlying ETF since the commencement of the Outcome Period will not be protected by the sought-after protection, and an investor could experience losses until the Underlying ETF returns to the original price at the commencement of the Outcome Period.

Fund shareholders are subject to an upside return cap (the “Cap”) that represents the maximum percentage return an investor can achieve from an investment in the funds’ for the Outcome Period, before fees and expenses. If the Outcome Period has begun and the Fund has increased in value to a level near to the Cap, an investor purchasing at that price has little or no ability to achieve gains but remains vulnerable to downside risks. Additionally, the Cap may rise or fall from one Outcome Period to the next. The Cap, and the Fund’s position relative to it, should be considered before investing in the Fund. The Fund’s website, www.calamos.com, provides important Fund information as well information relating to the potential outcomes of an investment in a Fund on a daily basis.

These Funds are designed to provide point-to-point exposure to the price return of the Reference Asset via a basket of Flex Options. As a result, the ETFs are not expected to move directly in line with the Reference Asset during the interim period.​

Investors purchasing shares after an outcome period has begun may experience very different results than fund’s investment objective. Initial outcome periods are approximately 1-year beginning on the fund’s inception date. Following the initial outcome period, each subsequent outcome period will begin on the first day of the month the fund was incepted. After the conclusion of an outcome period, another will begin.​

FLEX Options Risk The Fund will utilize FLEX Options issued and guaranteed for settlement by the 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 the FLEX Options, the Fund may have difficulty closing out certain FLEX Options positions at desired times and prices. The values of FLEX Options do not increase or decrease at the same rate as the reference asset and may vary due to factors other than the price of reference asset.​

Shares are bought and sold at market price, not net asset value (NAV), and are not individually redeemable from the fund. NAV represents the value of each share’s portion 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 as of the close of trading on the exchange where fund shares are listed.​

100% capital protection is over a one-year period before fees and expenses.  All caps are pre-determined.

Cap Range – Maximum percentage return an investor can achieve from an investment in the Fund if held over the Outcome Period. Cap range depicted is the high and low cap rate over the past 15 trading days. Actual cap delivered by the Fund may be different.

Protection Level – Amount of protection the Fund is designed to achieve over the Days Remaining.

Outcome Period – Number of days in the Outcome Period.

Nasdaq® and Nasdaq-100 are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use by Calamos Advisors LLC.  The Fund has not been passed on by the Corporations as to their legality or suitability.  The Fund is not issued, endorsed, sold, or promoted by the Corporations.  The Corporations make no warranties and bear no liability with respect to the Fund(s).​


Calamos Financial Services LLC, Distributor

Calamos Financial Services LLC​
2020 Calamos Court | Naperville, IL 60563​
866.363.9219 | www.calamos.com | [email protected]
2024 Calamos Investments LLC. All Rights Reserved.​
Calamos and Calamos Investments are registered trademarks of Calamos LLC.​


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