Miriam Sjoblom: I've heard you say that convertibles are often misunderstood by investors. And that may have something to do with you saying that they make sense as a good defensive equity strategy. What do you think is the most common misunderstanding?
John Calamos: Well, I think many investors tend to lop all the convertibles into, "Well, it's an asset class and it should behave this or that," and they forget that it's made up of individual securities with different attributes. It's kind of like saying all stocks are the same, which of course we know that's not true.
In the convertible area, you can be a junk-bond manager. Speculative convertibles have done well, but they did very, very poorly last year. So they're very speculative, and we typically stay away from the very speculative area.
Or you can be more conservative, as we are. We tend to be, on average, investment-grade in our convertibles, because we want the downside protection. Convertibles can act like equities sometimes, or bonds. The essence of a convertible strategy is, what is the investment objective you're trying to achieve?
The investment objective we're trying to achieve is defensive equity: How can we beat the equity markets at less risk? And so, for example, our convertible fund has a beta of 0.6, 40% less risky than the stock market, and has outperformed the stock markets.