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CNWIX Does What an EM Fund Should Do
April 25, 2024
CNWIX provides the emerging markets allocation investors are seeking
When investing in an EM fund, you expect a portfolio of mostly EM companies. Unfortunately, most peers in the Morningstar category have large allocations to developed markets that can distort an investor’s overall portfolio with unintended exposures. Most US investors are overallocated to US equities due to home country bias, among other reasons. Even the MSCI World Index, representing companies across developed market countries, currently holds a historically high allocation to the US.
What about EM funds? It turns out that investors who seek an allocation to EM equities by utilizing an EM fund must perform their due diligence and evaluate whether a fund manager focuses on EM or drifts into developed markets to chase recent performance. Calamos Evolving World Growth Fund (CNWIX) provides a higher EM allocation (see chart) and ranks in the top decile as of December 31, 2023, for its exposure to EM countries compared to the category average.*
EM vs. DM % Allocation for Morningstar Diversified EM Category Funds
Source: Morningstar. EM and DM % based on revenue exposure by region as of 12/31/2023
*CNWIX has the flexibility to invest in DM-domiciled companies with significant revenue exposures attributable to emerging markets.
CNWIX provides a higher-quality, higher-growth portfolio than most peers
Investors seek higher growth and higher quality from their EM exposures. However, finding a fund that captures these characteristics in good measure can prove challenging.
Higher-quality companies have a consistent record of higher profitability and lower leverage. We believe investing in higher-quality EM companies is especially important because they provide a measure of risk management in countries that are less regulated or have underdeveloped capital markets.
Higher-growth companies have a strong record of delivering relatively higher revenue, earnings, book value, and cash-flow growth. Moreover, these companies have delivered strong risk-adjusted returns over complete market cycles. EM value companies tend to have higher exposures to state-owned enterprises and can be value traps with bleak prospects. We maintain that seeking companies with higher-growth characteristics can avoid such exposures and provide strong returns.
CNWIX surpasses the EM index and its category peers in providing holdings with higher quality and growth attributes. Our process is founded on identifying companies that benefit from durable secular themes, providing tailwinds for sustainable growth. We emphasize investment in countries enacting structural reforms and improving economic freedoms, which we believe enhances a country’s and individual company’s growth prospects while mitigating risk.
Growth and Quality Exposures CNWIX vs. Index and Category Average
Source: Morningstar as of 12/31/23
Purity, Growth, and Quality—how about performance?
CNWIX has outperformed the index and the category since its inception by 181 basis points and 247 basis points, respectively. To find out how Calamos Evolving World Growth Fund can enhance an investment portfolio with a durable, diversified EM allocation, contact your Calamos Investment Consultant at 866-363-9219 or caminfo@calamos.com.
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.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
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.
The principal risks of investing in the Calamos Evolving World Growth Fund include equity securities risk consisting of market prices declining in general, growth stock risk consisting of potential increased volatility due to securities trading at higher multiples, foreign securities risk, emerging markets risk, convertible securities risk consisting of the potential for a decline in value during periods of rising interest rates and the risk of the borrower to miss payments, and portfolio selection risk. As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to the potential for greater economic and political instability in less developed countries.
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