Calamos Investments recently filed a registration statement for an actively-managed Select Growth ETF. Should investors care? To answer that, let’s take a closer look at the Principal Investment Strategies section of the statement:
The Fund invests primarily in equity securities issued by U.S. companies. Under normal market conditions, the Fund invests primarily in companies with market capitalizations of greater than $1 billion that the Adviser believes offer the best opportunities for growth. The Fund may invest up to 25% of its net assets in foreign securities.
When buying and selling growth-oriented securities, the Adviser focuses on the company’s growth potential coupled with financial strength and stability. When selecting specific growth-oriented securities, the Adviser incorporates the firm’s top-down macro-economic views and focuses on individual security selections (referred to as a “bottom-up approach”) based on qualitative and quantitative research.
In seeking to meet the Fund’s investment objective, the Fund’s investment Adviser utilizes a disciplined investment process designed to help enhance investment returns while managing risk. As part of these strategies, an in-depth proprietary analysis is employed on an issuing company and its securities. At the portfolio level, risk management tools are also used, such as diversification across companies, sectors and industries to achieve a risk-reward profile suitable for the Fund’s objectives.
The Fund invests primarily in equity securities issued by U.S. companies. The Fund currently anticipates that substantially all of its portfolio will consist of securities of companies with large and mid-sized market capitalizations. The Fund’s investment adviser generally defines a large cap company to have a market capitalization in excess of $25 billion and a mid-sized company to have a market capitalization greater than $1 billion, up to $25 billion. The Fund may invest up to 25% of its net assets in foreign securities.
In pursuing its investment objective, the Fund seeks out securities that, in the investment adviser’s opinion, offer the best opportunities for growth. The Fund’s investment adviser typically considers the company’s financial soundness, earnings and cash flow forecast and quality of management. The Fund’s investment adviser seeks to lower the risks of investing in stocks by using a “top-down approach” of diversification by company, industry, sector, country and currency and focusing on macro-level investment themes.
In addition, these documents show the same nine managers for both funds. Therefore, it would be reasonable to assume that both funds will pursue very similar investment strategies, although the “select” in the ETF’s name would suggest a more concentrated portfolio than that of the Growth Fund.
To get an idea of what the performance of the upcoming ETF may look like, let’s review the historical performance of the Growth Fund:
Since early 2005, the fund exhibited a decisively downward trend in its cumulative RealAlpha™. This is further demonstrated by performance statistics:
Unless the forthcoming active ETF adopts a drastically different investment strategy, the historical risk-adjusted performance of its sibling mutual fund does not bode well for the future of this new product.