Calamos: A New Convert to High Yield

A small player new to the high yield market has big hopes for the future. And a big part of its plans include convertible issues.

Naperville, Ill.-based Calamos Asset Management launched a new high yield fund last week, at the very time that other portfolio managers are scaling back and talking about cash outflows.

The new fund has only about $1 million so far, so cash flows are not the immediate problem. And as far any droughts in the market and liquidity problems, Calamos is hearing none of it.

"This is a good time to [launch]," said director of research Nick Calamos. "Credit spreads have widened recently... it should be very easy to build an attractive portfolio."

The Calamos High Yield fund is the sixth mutual fund in the family, which has almost $4 billion in total assets under management.

Convertible issues are Calamos' specialty, and this will spill over into the high yield arena as well. Calamos said the firm feels comfortable with as much as 20% to 30% of the high yield portfolio being in the form of converts.

"We see the same names as the pure high yield guys over and over... we think it's a natural fit for us," he said.

One area where convertibles have posted nice returns is the home building sector, Calamos said. Two names that are yielding well are Beazer Homes and Lennar Corp., he said.

Technology and telecommunications are other favored sectors for Calamos. Globalstar, in particular, is one issuer that the fund likes. The issue has been unnecessarily punished because of the problems on the overall sector, he said.

"It's been taking too much flack for Iridium's problems," he said.

Another technology firm the fund likes is Exodus Communications, a manager of Web sites that has a $250 million convertible deal outstanding, as well as a $275 million issue of senior notes.

And finally, two other areas he likes are gaming and REITS, he said.