Finance
New Calamos ETF promises ‘100% downside protection.’ How it works
A new ETF designed to shield investors from the risk of market volatility starts trading on Wednesday.
The Calamos S&P 500 Structured Alt Protection ETF (CPSM) promises to deliver investors “100% downside protection” against the index’s losses over a one-year outcome period, according the firm’s news release.
Calamos’ head of ETFs Matt Kaufman helped build the new product.
“There’s no tricks. There’s no magic,” he told CNBC’s “ETF Edge” on Monday. “This is the secret sauce.”
Kaufman explained the new ETF enters into three options positions. Investors in the fund are subject to limits on the extent to which they can capture gains tied to the S&P 500.
“They all work together. It’s a fully funded options package that delivers the upside of the S&P 500 to a cap with 100% capital protection over a 365-day outcome period,” he said. “Then at the end of that year, the options reset, stay in the ETF and keep on going.”
The fund will have an annual expense ratio of 0.69%.
In order to receive the full downside protection against losses in the S&P 500 that the fund promises, Kaufman noted investors must buy it Wednesday when it hits the market.
“If you buy in on day one, you get that 100% protection,” he said. “[But] even day two [or] day three, there’s probably opportunities to buy in all along the way.”
The fund is just one of a suite of 12 structured protection ETFs the firm plans to launch over the course of the next year. Upcoming funds include those aiming to protect against losses tied to the Nasdaq 100 and Russell 2000 benchmarks.
Money manager John Davi is positioning for challenges tied to President-elect Donald Trump’s tariff agenda.
Davi said he worries the new administration’s policies could be “very inflationary,” so he thinks it is important to choose investments carefully.
“Small-cap industrials make more sense than large-cap industrials,” the Astoria Portfolio Advisors CEO told CNBC’s “ETF Edge” this week.
Davi, who is also the firm’s chief investment officer, expects the red sweep will help push a pro-growth, pro-domestic policy agenda forward that will benefit small caps.
It appears Wall Street agrees so far. Since the presidential election, the Russell 2000 index, which tracks small-cap stocks, is up around 4% as of Friday’s close.
Davi, whose firm has $1.9 billion in assets under management, also likes staying domestic despite the tariff risks.
“We’re overweight the U.S. I think that’s the right playbook in the next few years until the midterms,” added Davi. “We have two years of where he [Trump] can control a lot of the narrative.”
But Davi plans to stay away from fixed income due to challenges tied to the growing budget deficit.
“Be careful if you own bonds for sure,” said Davi.
Since the election, the benchmark 10-year Treasury yield is up 3% as of Friday’s close.
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