Calamos Launches First Autocallable ETF

The future is autocalling.

And alternatives manager Calamos is ready for it, pioneering an autocallable ETF that began trading last week. It’s the first ETF of its kind, providing monthly income via a coupon tied to equity markets rather than bonds, according to a release. The Calamos Autocallable Income ETF (CAIE) enters into swap agreements with JPMorgan and tracks the MerQube US Large Cap Vol Advantage Autocallable Index. The fund climbed 1.5% from Wednesday, its first day of trading on the NYSE Arca, through Friday afternoon.

“It replicates some of what structured notes do, and that space has grown tremendously,” said Matt Kaufman, the company’s head of ETFs. “All the boats have risen with the tide. I think that’s going to happen with autocallables as well.”

Autocall Me Maybe

The arrival of autocallables — structured products that are automatically redeemed when certain conditions, such as the underlying asset reaching a specified value, are met — further broadens the spectrum of ETF products. Calamos is betting on autocallables reaching the same level of popularity as buffer ETFs and structured annuities, said Kaufman.

The fund uses a laddered structure in which different notes have different maturity dates, staggered weekly. Kaufman said the product is ideal for investors who want a high-risk, high-reward, regular income option without the reinvestment risk that comes with single-note autocallables. “A lot of advisors today who are buying autocallable notes, those notes can get called away … and then you have to go shopping again. You have to reinvest your proceeds,” Kaufman said. “All of that goes away when you build a laddered version of this inside of an ETF.” 

CAIE’s MerQube index is tied to $3 billion in JPMorgan structured notes, Kaufman added, giving investors exposure to the roughly 52 laddered autocalls inside the fund. According to recent data:

• Autocallable structured notes made up more than $104 billion in issues last year, according to Calamos.
• Derivative income funds and covered-call strategies saw $39 billion in net inflows, pushing total AUM to $114 billion, per Morningstar.

Having Faith. Vinit Srivastava, the co-founder and CEO of MerQube, said the diversified aspect of index-based autocalls reassures investors that their investments will generate returns. “As the market is changing, we think option-linked ETFs will keep growing,” he added. “Things that people did not consider, like [autocallables], to be in their portfolio, they will see more of that going forward.”