Calamos Wealth Management was born out of Calamos Investments, which now has approximately $36 billion in total assets. Calamos' history dates back to the 1970s when John P. Calamos Sr. founded the firm. He started the organization by managing money for friends and family as well as other Air Force pilots; he was a fighter pilot in Vietnam.

Now, its RIA arm caters to single-family households $3.75 billion in assets. But the firm has ambitious growth plans, according to Jon Adams, senior vice president and chief investment officer at Calamos Wealth Management. This is likely to be through a combination of organic growth, expanding portfolio sharing with existing customers and acquisitions.

Adams recently spoke with WealthManagement.com about the RIA's tailored asset allocation approach, its model portfolios and how the firm's asset management ownership benefits advisors.

The following has been edited for length and clarity.

WealthManagement.com: What's in your model portfolio?

Jon Adams: We run everything in a very personalized way here at Calamos Wealth Management. We don't have, for example, just five model portfolios for customers to choose from. We customize each allocation for each individual client, but I can definitely speak broadly in terms of how we think about a more balanced type of allocation.

For us, a 60/40 portfolio is more like a 50/30/20 portfolio, with about 50% in equities, 30% in fixed income and 20% in alternatives. Our heritage is as a liquid alts manager, so we incorporate a number of diversifiers into our portfolios such as infrastructure, convertible bonds, hedged equity and market neutral. For liquid investments, we are mainly using mutual funds and ETFs.

But we are incorporating liquid and private alternatives into clients' portfolios.

We are also using private alts, where it makes sense. In those we typically lead with evergreen funds such as tender offer or interval funds, although we also use drawdown funds for clients where we feel it is appropriate.

Within the equity bucket, we are using ETFs, mutual funds and SMAs. One benefit we have of being part of the Calamos Investments organization is that we have a number of internally segregated managed accounts that we are using for several client portfolios. They include a US large equity strategy, an international equity strategy, a municipal bond strategy, and a corporate bond strategy.

WM.com: What are the benefits of using those internal SMAs versus others?

AND: Number one, it's cheaper. We are not charging a management fee to use our SMAs, only an advisory fee. And then secondly, it gives us access to a portfolio management team within the organization. We've had client calls where our equity portfolio manager or our municipal bond PM will communicate with individual clients, give them an update on what they see as opportunities, give them an update on the markets , etc.

We selectively use Calamos funds in certain client accounts where we feel it is appropriate. These are funds like our neutral market fund, convertibles, hedged capital – funds that we're really known for, long distinguished track records, long manager tenure, those kinds of factors. But then within the individual equity buckets, I would say we have some core mutual fund holdings. We also supplement them with ETFs, for example, growth and value ETFs. We use them to get tactical trends in the portfolio as well. Right now, we've had a modest upward trend in the portfolio since the middle of last year.

WM.com: What does the fixed income part look like?

AND: For a taxable account, we typically currently incorporate approximately half municipal bonds, half taxable bonds, depending on the investors' circumstances, such as tax group. We use a core fixed income manager and complement that with plus sectors, so areas like corporates and high yield as well.

One notable differentiator is that we use a market neutral fund as a fixed income proxy. We've used it for about a quarter of our fixed income exposure over the past two years. This has been a way to really diversify exposure and fixed income portfolios and keep duration low in the rising rate environment we've seen.

WM.com: Do you have anything in cash?

AND: We have a very small portfolio-level cash allocation to cover fees and expenses, typically around 1% of the portfolio. We think money can be a drag over time. There is an opportunity to lock in relatively high fixed income rates. So if we have clients who have a higher cash balance, we're encouraging them to be fully spread across the portfolio.

WM.com: Does Calamos have any alternative products?

AND: On the alternative public side, we have an equity hedging capability, market neutral convertible bonds. On the alternative private side, we launched a private credit span fund a year ago with our partners at Aksia.

WM.com: Have you made any major investment allocation changes in the last six months to a year? If so, what changes?

AND: We usually do between three and six tactical shifts a year. We meet monthly as an investment committee meeting or more frequently as market conditions dictate. We added this growth bias last year. We also added high yield bonds last fall. This has been an added value for portfolios as spreads have narrowed. And then another tactical change we made was adding the duration to the middle of last year. We remain modestly underweight relative to the aggregate bond index, but increased duration significantly as we gained increasing confidence that rates were nearing a peak.

WM.com: What is the mix of assets and liabilities in the portfolio?

AND: We don't think it's an either-or question. It's about being selective and intentional about where you're using active management. We use active management in areas such as US small cap, international equities and core fixed income, for example. We are using more passives in the US as well as areas where we can get tactical views. This increase in value, for example, is done through ETF exposure. We are also active in our high yield exposure.

WM.com: What differentiates your portfolio and investment philosophy?

AND: The access we have to in-house portfolio managers and in-house capabilities is one. Second, the way we use alternatives in the portfolio, both on the liquid side and on the private side, is another. And finally, the tactical views that we're taking on the portfolio, in a year on average, three to six, depending on the established opportunities, where we're looking to add value to individual clients.

WM.com: Do you think that's more or less than what other firms make in a year?

AND: This is probably more than most firms are implementing. We don't usually get extremely large tactical shots; we typically take modest views, trying to add value to the spread in the portfolio, but we have a duplicate risk management process that ensures we're not deviating too much from the bands we have for portfolios for an individual investor.

Another differentiator is our use of Calamos Structured Hedging ETFs. They can be thought of as a type of structured note from one point of view, but with lower fees and 100% downside protection in the way they are structured.

These are the Calamos ETFs that have been launched in the S&P500, NASDAQ and futures in the Russell 2000. But all of those ETFs have 100% downside protection with up to a cap. The first of these was launched in May, the second in June, and Calamos is releasing one a month for the next year.

These are options for clients who have large cash allocations, are nearing retirement, or may be looking to take some chips off the table given the strong performance of the equity market.

WM.com: Does RIA have any kind of influence on the products coming out of the asset management side?

AND: Absolutely. We have a seat at the table in terms of the products that Calamos Investments is looking to launch. Some of these discussions revolve around what customers are asking about, what customers are concerned about, what gaps are customers concerned about in their portfolios, and then it's about being really creative from a product perspective in looking to advance our solutions for our customers.

WM.com: Do you use direct indexing?

AND: We are actively exploring live indexing capabilities as we speak. I will say that the SMAs that we run domestically are being optimized for tax loss harvesting, so we're implementing tax loss harvesting across all of those SMAs and we're actively looking at adding direct indexing capability as well .

WM.com: What is your due diligence process for selecting asset managers?

AND: We have an investment committee within the RIA that includes a number of members across the organization. We have a manager research committee sitting within the investment committee, but I would say that is primarily a function of our asset allocation decision. Here is the first level decision.

Then the second level is really how we apply that view to the portfolio through which manager, but we would typically run a screen when we're looking to add a manager and a new capability, typically through Morningstar, noting, say , four to five managers on average. We are then doing an in-depth analysis of those managers, meeting with them in person, reviewing those strategies in detail, and then recommending a particular manager for our investment committee to vote on for inclusion on our list. approved. This is the same procedure for internal and external skills.

WM.com: Do you have any interest in Bitcoin ETFs? Crypto?

AND: We have nothing on our platform in Bitcoin or crypto or digital assets. We are exploring the space, doing analysis and determining if it makes potential sense for some client portfolios. Some of our customers hold digital assets in their accounts, but there are currently no capabilities on our approved list.

WM.com: Are you incorporating ESG into your portfolio? If so, how?

AND: We have models that include ESG and sustainable investments depending on the client's preferences, and we have an ESG team with a long history within Calamos Investments.

WM.com: Does Calamos have ESG products?

AND: Yes, mutual funds and ETFs. We use them selectively in client portfolios.