A Fund for All Seasons, on the Cheap

05/27/2009 11:19 am EST


Nick Lanyi

Editor, High-Yield International

Calamos Global Total Return is a good fit for defensive-minded investors, writes High-Yield International editor Nick Lanyi.

Calamos Global Total Return (NYSE: CGO) [is a] unique closed-end fund—what Calamos refers to as a "defensive global equity" fund.

The fund's managers start by investing roughly half of the portfolio in attractive large-cap growth stocks like Nintendo (OTC: NTDOY) and Nokia (NYSE: NOK) from over a dozen markets around the globe. And to clamp down on volatility, the fund sinks the remainder of its assets into securities that generate a reliable monthly income stream, such as convertible bonds issued by companies like Intel (Nasdaq: INTC) and high-yield corporate bonds written by firms like privately held SunGard Data Systems.

Overall, about 44% of the portfolio is invested in North America, while Europe accounts for 35% and Asia, Latin America, and the Middle East make up the remaining 21%.

This strategy is designed to capture much of the up side potential of the global equity markets when times are good. And when stocks are retreating, the steady monthly income should help limit the down side.

Thus far, everything has gone according to plan. Shares in CGO posted a sizeable gain of 23% in its first full year of operation in 2006, and in 2007 it followed up that performance with another 23% gain—roughly double the 11% earned by its average rival. The fund struggled during 2008, and so far in 2009 it's up slightly.

Over the past two years, the fund has boosted its monthly distribution per share five times, from $0.075 in 2006 to $0.115 in 2008. It has since lowered it to $0.10, giving CGO a yearly distribution of $1.20 and a dividend yield of 11.7%. [CGO closed at $11.01 in New York Tuesday, its annual yield slipping to 10.9%—Editor] 

Right now, CGO is trading at nearly a 16% discount to net asset value (NAV) [the NAV discount was down to 12.7% as of May 22—Editor]. While it's not the biggest discount ever seen by the fund—that distinction goes to November 2008--it's still well above its historical average, which spends much more time in the -5% to -10% range.

I like the fund's investment approach and believe over time it can continue to put up attractive total returns. Fans of one-stop international and income investment shopping who don't want their portfolios cluttered with too many holdings should find CGO a good fit.
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