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Calamos: Why Investors Must Look Overseas

Jason Stipp

Jason Stipp: You do run some global and foreign funds and one of the things that Morningstar looked at in the not-too-distant past was the amount of money that S&P 500 or so-called domestic companies got from overseas. So as an investor when I am thinking about why I should own a global fund or a foreign fund, I may think I am already getting some exposure to overseas markets by owning Procter & Gamble, for example, what's the argument for me to seek out a dedicated foreign fund?

John Calamos: Well, you know, I think we are in a period--we are at an inflection point in the way investors are thinking, and I think U.S. investors in particular need to think more globally than ever before. You are exactly right. In fact in our domestic U.S. growth, we look at companies that have more revenues coming from outside the U.S., because they are not just U.S. companies; they are global companies. But to ignore other parts of the world that have great companies, you know, would be not wise. So in our international growth fund, we are finding good companies all over the world. And that I think is going to be more important going forward.

It really plays to one of our themes that maybe I should have mentioned earlier is what we look at when we think about global investment, we look at countries that are creating a middle class. What made America great was its middle class and as that expanded, so did GDP, so did prosperity.

While we are seeing that happening all over the world, how do you take advantage of it, how did you take advantage of China's 250 million dollar middle class growing enormously, India and other parts of the world like that, and what companies are really playing to those themes.

So I think we need to think more globally than ever before, and our international fund helps investors that maybe are domestically based pretty much to say, OK, I need some exposure to non-U.S. great growth companies and that's what our international growth fund tries to do.

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Stipp: OK. Sort of to follow up on the same theme of the international and the domestic, there is lot of talk and lot have been written about this new normal environment that's supposedly going to bring a lot slower growth to some countries. And I think a lot of folks have kind of moved over into emerging markets, for example, to try to capture perhaps a little more growth than they perceive that they would be able to get domestically.

What's your take on that split between slower growth in some areas, bigger growth in others and if emerging markets offer better growth prospects, are they priced for you to really be able to take advantage of that?

Calamos: Good question. And I think again with the theme of thinking much more global, it gives us opportunities to focus on different areas where growth is really occurring. The present environment to me feels very much like what I went through in the 1970s and early '80s, really very difficult economic environment, commodity prices were going up, we had government issues, all those things going on.

But what we didn't have back then was the ability to invest outside the United States, and because of that, the ability to invest outside the United States is really a check on bad government policy. So when you think about the landscape, the world, to invest in, some countries are going to make a bad government policy and some are going to make the right government policy. Well, where do you want to invest. And that's going to change from time to time.

We have obviously a lot of focus on Greece, bad government policy, the market punishes that. Well do you want to invest there now? You want to go where there is a better government policy, and that's what we are looking for.

I think as far as the emerging markets in those, there is a lot of momentum to them, and you have to be careful about price momentum, because momentum pushes prices in and people buy in momentum, but we think fundamentals trump momentum, so we want to not only look at the momentum factors, but really be comfortable with the price.

What's interesting about the emerging markets that I think a lot of people have missed is they are no longer emerging; they are here. You know, I think the phrase "emerging" was very relevant years ago, but now emerging markets represent 35% of global GDP; stocks in emerging markets only represent 12% of the total global stocks, so people are underinvested in those emerging markets.

So, we continue to look at those, but having said that, you want to be very bottom-up on what you are investing in, and just not buying the asset class, and being very specific. But we are seeing a lot of opportunities in there, and there is a lot of challenges in all those markets, but there always has been.

Stipp: Sure. Thanks for your insights. It is very fascinating. It is a pleasure speaking with you today.

Calamos: My pleasure as well. Thank you, Jason.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.