In the final quarter of 2025, the Calamos Convertible and High Income Fund (CHY) exhibited robust financial growth, with its price appreciating by 5.40% and its Net Asset Value (NAV) increasing by 2.27%. These figures notably outpaced the blended comparator index's 1.69% return for the same period. The US Convertible market as a whole saw a 1.97% rise, culminating in a strong year with a 17.98% calendar year advance. This impressive performance highlights the fund's strategic positioning and effective management in a dynamic market environment.
The global convertible bond market experienced significant activity, with new issuances reaching $40.6 billion in the fourth quarter. The United States alone accounted for a substantial portion of this, with $36.2 billion in new convertible securities coming to market. This high level of issuance underscores the growing appeal and utility of convertible instruments for companies seeking capital and investors looking for hybrid investment opportunities. The fund's ability to capitalize on these market trends was a key factor in its success.
A critical driver of the fund's outperformance was its strategic weighting in the information technology sector. Holdings within the communications equipment and technology hardware industries yielded particularly strong results, contributing positively to the fund's relative returns. This sector-specific success reflects a meticulous selection process and a keen understanding of market dynamics within high-growth areas.
Looking ahead to 2026, the fund's management remains optimistic about the continued strong issuance in the convertible market and anticipates potential merger and acquisition (M&A) activities. These factors, combined with the benefits derived from exposure to small and mid-cap companies, are expected to provide further growth opportunities. The current economic climate is also deemed favorable for employing leverage judiciously to enhance total returns and sustain the fund's distribution rate.
Despite the positive outlook, the fund acknowledges several potential risks. These include inflationary pressures, ongoing geopolitical tensions, and the inherent volatility associated with election cycles. Such macroeconomic and political factors could influence market sentiment and performance. Therefore, while maintaining an overweight position in information technology and industrials and an underweight in consumer discretionary and financials, the fund also sustains a 35% leverage ratio, balancing aggressive growth strategies with prudent risk management.
The fund's strong close to 2025, marked by significant returns and strategic sector focus, positions it favorably for future challenges and opportunities. Its active management approach, coupled with a nuanced understanding of market conditions, will be crucial in navigating the complexities of the investment landscape and continuing to deliver value to its investors.
