Calamos Growth and Income Fund's Q2 2025 Outperformance and Strategic Allocation

In Q2 2025, the Calamos Growth and Income Fund (CGIIX) delivered a remarkable 19.34% Class I return, far outpacing the S&P 500's 6.2% gain and the Lincoln Private Market Index's (LPMI) anemic 2.5% rise Tax management update – Q2 2025^[1]. This performance underscores the fund's ability to harness the asymmetric payoff potential of convertible securities while mitigating volatility through disciplined risk management. As public markets rebounded on optimism over deferred tariffs and multiple expansion, CGIIX's strategic allocation to convertibles and its hybrid portfolio structure positioned it to capitalize on both equity upside and downside protection.

The Power of Convertibles in a Volatile Landscape

Convertibles—hybrid instruments that blend equity-like upside with bond-like downside protection—have long been a cornerstone of CGIIX's strategy. In 2025, the fund deepened its focus on convertibles offering “meaningful equity participation” while prioritizing securities with embedded floor prices or coupon structures to cushion losses during market corrections Upbeat on Convertible Securities Heading into 2H 2025^[2]. This approach proved particularly effective in Q2, as the fund's portfolio benefited from the rally in growth stocks, especially among the “Magnificent 7”-style names that drove the S&P 500's 6.2% gain S&P Composite 1500 Growth | S&P Dow Jones Indices^[3]. Convertibles tied to these high-growth companies provided leveraged exposure to rising equity prices while capping downside risk, a dynamic that amplified returns relative to straight equity or fixed-income allocations.

The fund's outperformance also reflects its active management of duration and sector exposure. By tilting toward convertibles in technology, healthcare, and clean energy—sectors poised to benefit from secular trends like AI adoption and decarbonization—CGIIX captured growth without overexposing itself to cyclical headwinds Upbeat on Convertible Securities Heading into 2H 2025^[2]. This contrasts with the S&P 1500 Growth Index, which, while rebounding in Q2, remains heavily weighted toward public equities that face valuation challenges and macroeconomic sensitivities.

Risk Management: The Unsung Driver of Outperformance

CGIIX's ability to generate equity-like returns with lower volatility hinges on its rigorous risk management framework. The fund employs a multi-layered approach, including:
1. Active Security Selection: Focusing on convertibles with asymmetric payoff profiles, where the potential for capital appreciation outweighs the risk of principal loss.
2. Top-Down Thematic Allocation: Balancing secular growth themes (e.g., AI, renewable energy) with cyclical hedging to avoid overconcentration in any single macro narrative.
3. Options and Derivatives: Using put options and other derivatives to further insulate the portfolio from sudden market shocks Upbeat on Convertible Securities Heading into 2H 2025^[2].

This disciplined approach is critical in a market environment where public-private valuation gaps persist. While the S&P 500 surged on multiple expansion, the LPMI lagged, highlighting the challenges of illiquid private assets in a rapidly shifting rate environment The Lincoln Private Market Index Records Another Quarter of Growth in Q2^[4]. CGIIX's hybrid structure—combining convertibles, fixed income, and options—offers a middle ground, delivering liquidity and flexibility to adjust to changing conditions.

A Model for Long-Term Growth with Lower Risk?

The fund's Q2 performance raises the question: Can CGIIX's strategy deliver sustainable, equity-like returns with reduced volatility over the long term? Historical data suggests yes. By blending the best features of equities and bonds, convertibles have historically outperformed both asset classes during periods of market stress and growth. For instance, during the 2020 pandemic selloff, convertibles held their value better than equities while participating in the 2021 rebound Upbeat on Convertible Securities Heading into 2H 2025^[2].

However, the fund's success depends on its ability to maintain its asymmetric edge. As interest rates stabilize and growth stocks face profit-taking, CGIIX must continue to identify undervalued convertibles with strong equity catalysts. Its focus on “downside risk mitigation features” Upbeat on Convertible Securities Heading into 2H 2025^[2] will be key to preserving returns in a potential market correction.

Conclusion

Calamos Growth and Income Fund's 19.34% Q2 return is a testament to the power of strategic convertible allocation and proactive risk management. While the S&P 1500 Growth Index's exact performance remains unspecified, the fund's outperformance relative to the S&P 500 and LPMI highlights its unique value proposition: capturing growth without sacrificing capital preservation. For investors seeking equity-like returns with a lower volatility profile, CGIIX offers a compelling case study in how hybrid strategies can thrive in an era of market fragmentation.