The Calamos Global Total Return Fund: High Yield with International Diversification and Increased Risk
The Calamos Global Total Return Fund (CGTRX) is an intriguing investment option for those seeking a high yield, with a current rate of 8.47%. However, this fund has not managed to deliver the same level of performance as its domestic-only counterpart, the Calamos Equity Income Fund (CEIEX), which boasts a 12.93% yield as of October 2021. This discrepancy in performance has left some investors puzzled.
International Diversification: A Double-Edged Sword
One reason for the underperformance of the Calamos Global Total Return Fund could be its international diversification. The fund invests in both developed and emerging markets, providing exposure to a wider range of economies and industries. However, the recent strength of the U.S. dollar has been a headwind for the fund. As the dollar gains value, the returns on foreign investments decrease, as they must be converted back into U.S. dollars for investors.
Significant Leverage: Boosting Returns, Increasing Risk
Another factor contributing to the fund’s performance is its significant use of leverage. The fund employs a net asset value (NAV) leverage of 35.27%, meaning that it borrows a substantial amount of money to invest in securities. This strategy can boost returns, but it also increases risk and volatility. For risk-averse investors, the added risk may not be worth the potential reward.
Impact on Individual Investors
For individual investors considering the Calamos Global Total Return Fund, it is essential to weigh the potential benefits of the high yield and international diversification against the increased risk and volatility. Those with a high risk tolerance and a long-term investment horizon may find the fund appealing. However, investors who are risk-averse or have a shorter investment horizon may want to consider other options.
Global Implications
The performance of the Calamos Global Total Return Fund is not just an isolated event. The fund’s underperformance in the face of a strong U.S. dollar and the use of significant leverage are trends that can have broader implications for global markets. As more investors seek to tap into international markets, the impact of currency fluctuations and leverage on their returns becomes increasingly important.
Conclusion
The Calamos Global Total Return Fund offers a high yield and international diversification, but its use of significant leverage and the impact of a strong U.S. dollar on returns make it a risky investment option. For individual investors, it is crucial to consider their risk tolerance and investment horizon before investing in the fund. On a larger scale, the Calamos Global Total Return Fund’s performance highlights the importance of understanding the risks and benefits of international diversification and leverage in today’s global economy.
- The Calamos Global Total Return Fund offers a high yield of 8.47% but has underperformed compared to its domestic-only counterpart.
- International diversification can be a double-edged sword, with the recent strength of the U.S. dollar hurting the fund’s performance.
- The fund employs significant leverage (35.27%) to boost returns, but this also increases risk and volatility.
- Individual investors must weigh the benefits of the high yield and international diversification against the increased risk and volatility.
- The Calamos Global Total Return Fund’s performance has broader implications for global markets, highlighting the importance of understanding currency fluctuations and leverage.
