Calamos Investments is gearing up to launch its first interval fund, a regulatory disclosure shows.

The global credit fund will seek to capitalize on distressed credit opportunities that have been revealed by the pandemic, according to a filing.

"Efforts to contain the global pandemic have caused a significant disruption to worldwide economic activity and steep declines in the valuations of certain financial assets," says the prospectus of the proposed fund. "As a result, there is a growing pipeline of highly attractive distressed credit investments."

The fund will also invest in direct private lending opportunities, corporate debt instruments and private credit instruments. Investments could also include junk bonds, the filing says.

To provide liquidity to clients, twice a year the interval fund will repurchase between 5% and 25% of the fund's outstanding shares at net asset value. The fund will be available in Class A, M and institutional share classes.

The filing did not reveal the names of the portfolio managers, the fund's expense ratio or when it will launch. A Calamos spokesman declined to comment on the proposed fund.

Calamos and Avenue Capital will handle the day-to-day management of the fund. This is Calamos's first fund with the $9.5 billion firm that specializes in distressed debt and private equity investments, confirms the company spokesman.

Industrywide, interval fund assets rose to $32.6 billion as of the end of March, up roughly 2.5% from the end of previous quarter, according to data from Interval Fund Tracker.

Most of the growth in the interval fund space comes from strategic and opportunistic credit strategies, says Rajib Chanda, partner at Simpson Thacher. Such strategies give retail clients access to an otherwise expensive, illiquid market, he says.

Only one new interval fund launched during the first quarter of 2020, according to Interval Fund Tracker: the KKR Credit Opportunities Portfolio. Four were born during the year-earlier period, and five came to market during the last three months of 2019. In April, another interval fund launched, the CIM Real Assets & Credit Fund.

Also during the first quarter, Goldman created two interval funds that absorbed existing products run by Resource, an alternative asset management company. One was a real estate fund and the other a credit fund.

Only one interval fund was liquidated in the first quarter: the Sierra Total Return Fund.

Calamos already operates 19 open-end and seven closed-end funds, including several alternatives, according to its website. As a result, launching and operating an interval fund will not be a challenge for the Naperville, Ill.-based firm, says Chanda. However, the firm may need to add dedicated sales staff to market it to distributors, he adds.

"Intermediaries have accepted interval funds in fits and starts," says Chanda. "There hasn't been wholehearted acceptance across the board because offering interval funds involves changing some aspects of how advisors work with clients, and that can be a barrier to overcome."

Shares of mutual funds and ETFs can easily be redeemed, while interval funds provide liquidity only during repurchase windows, he says. This may require different systems and conversations with clients that advisors may not be equipped to have, he explains.

Contact the reporter on this story at rrao@ignites.com or 212-390-7334.

Calamos to Launch First Interval Fund

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