Calamos debuts capital-protected Nasdaq 100 ETF

Jun 3rd, 2024 | By | Category: Equities

Calamos Investments has expanded its ‘Structured Protection’ suite of defined outcome ETFs with the first fund to offer full capital protection on the world’s pre-eminent growth-oriented index – the Nasdaq 100.

John Koudounis, President and CEO of Calamos Investments

John Koudounis, President and CEO of Calamos Investments.

The Calamos Nasdaq-100 Structured Alt Protection ETF – June (CPNJ US) has been listed on NYSE Arca with an expense ratio of 0.69%.

“With the Nasdaq 100 near all-time highs, CPNJ offers a simple way to de-risk while staying invested,” said John Koudounis, President and CEO of Calamos Investments. “Our new suite of Structured Protection ETFs is built on our nearly 50-year heritage and expertise in delivering innovative alternative solutions, easily accessible to all investors.”

Investment approach

Defined outcome investing refers to an investment strategy that shapes the potential outcomes of a reference asset or index to fit specific protection and return levels, allowing for a more controlled investment experience.

Calamos’s Structured Protection ETFs utilize FLexible EXchange (FLEX) options—customizable, exchange-traded option contracts guaranteed by the Options Clearing Corporation—to provide 100% downside protection on their target index as referenced from the start of a one-year outcome period.

The downside protection comes at the expense of a cap on potential equity upside which is determined based on market conditions at the outset of the outcome period. According to Calamos, the cap on CPNJ is 10.20% (gross of fees) for the initial one-year outcome period which concludes on 30 May 2025.

Calamos’s Structured Protection ETFs have a perpetual structure meaning that the downside protection and caps are reset at the end of each annual outcome period.

Investors should note that, as the defined outcome profiles of these funds have been tailored for their specific outcome period, this may affect their interim returns during the outcome period in two ways.

Firstly, due to the time value of the underlying options, the ETFs are likely to exhibit lower betas than traditional index-tracking ETFs. As such, they may lag the performance of their targeted index when markets are trending upwards.

Secondly, the ETFs are designed to provide full downside protection as referenced from the start of their outcome period. An investor who purchases shares of an ETF after the outcome period has begun may be immediately exposed to the downside in so far as the underlying index has appreciated since the start of the outcome period.

While these dynamics can present a challenge, Calamos provides full daily disclosure for its Structured Protection ETFs including remaining cap, any potential downside before the capital protection kicks in, and remaining days in the outcome period.

Calamos debuted its first Structured Protection ETF last month with the launch of the Calamos S&P 500 Structured Alt Protection ETF (CPSM US) which delivers capital-protected exposure to the S&P 500. This fund, which has a cap of 9.81% (gross of fees) over its initial one-year outcome period until the end of April 2025, has accumulated $110 million in assets since its launch.

Calamos expects to roll out a third product line within its Structured Protection ETF suite next month with the first-ever fund to offer capital-protected exposure to the popular US small-cap equity index – the Russell 2000.

Each product line will ultimately feature four ETFs with one-year outcome periods staggered at quarterly intervals throughout the year, resulting in a total of 12 ETFs across the suite. This structure allows for new investment opportunities each quarter, catering to various market conditions and investor needs.

Each ETF in the suite will have an expense ratio of 0.69%, positioned competitively below the average cost for defined outcome ETFs currently available in the US.

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