Inside CAGE: Calamos’ New Autocallable Growth ETF with Matt Kaufman

It's been a good start to the year. We had a great 2025. We launched that autocallable income space. Here in 2026 that space is growing tremendously. We're seeing almost a billion dollars across the two funds that we've got in that market.

CAIE is our S&P 500 framework. We have CAIQ that's on the Nasdaq 100 framework. The autocallable space is growing tremendously. We're seeing that word used a whole lot these days. Just go back a year and no one really knew that term unless you were a structured note user.

Today we're seeing that used a lot. What we're doing now is bringing out a whole other half of that pie. So surprise, there's another half of the autocall space. It is squarely focused on growth. So the question being, what if we didn't distribute those coupons? Well, this product that we're going to talk about here is squarely designed for accumulation, for long-term growth, for investors looking for compounding that might be better than the S&P 500 over time.

[00:01:29] Doug Heikkinen: Yeah, you recently launched the Calamos Autocallable Growth ETF, CAGE, which made a pretty big statement. Like you said, CAGE me might be a better long-term solution than the S&P 500. That's a bold claim. Why don't you make the case for us.

[00:01:45] Matt Kaufman: Yeah, sure, sure. Yeah, I'm going to stick behind that.

I do think that C-A-G-E, or CAGE, the strategy that's behind that has the opportunity and the ability to compound faster than the S&P 500. So we are trading swap on a laddered index of autocallable growth notes. We can dive into what that means.

 There are some very unique features to the autocallable growth strategy. One of them is what's known as memory. So this would mean that each of these notes has a designated coupon that's going to be paid out.

In an income vehicle, you would want monthly income, so you'd have a monthly observation period to each of your notes. For here, it's an annual observation. And so if you look at the annual observation period, if the market is positive, you're going to get a high coupon.

 We're not distributing that, that stays in the fund. But if the market's positive, if the reference index is positive at that one year observation, you get that credit. What if it's not? If the market is not positive at that observation point?

You don't lose, it simply gets banked and stored for another day, for the next observation point one year later. You're going to get this really high coupon that just continues to "snowball," is the term a lot of people will use.

[00:03:02] Doug Heikkinen: Autocallables, as you mentioned, have been one of the biggest income stories of the past year, starting with CAIE. There's a bunch of these in the market now, but now that you've done autocallable growth, why expand the category to growth and what is it in unlock for investors?

[00:03:19] Matt Kaufman: Yeah, the autocallable income space is designed exactly for that.

It's designed for high, stable, and tax efficient income. So we built the world's first autocallable income ETFs last year. Again, those products have been doing exactly as they've been designed. We've completed year 2025. The tax statements have been issued, and about 90% or more of that income is treated as return of capital, so that's just tax deferred income to people. And then when you sell, if you've held for longer than one year, you will pay long-term capital gains on that income. Well, not everyone needs income. Some folks need growth. You think of it in a spectrum of somebody's age.

You're accumulating assets toward retirement, and then as you enter that retirement risk zone, you tend to want to de-risk and move into more income producing instruments. And so we've captured that income producing side. Well, there's a whole host of people that need to save. They need to grow their portfolio as they enter that retirement stage.

For some younger folks, it might feel like a really long time away. But if you're able to compound growth faster than the S&P 500, it actually allows you to take on volatility extremely well. If you have time on your side, you can now compound faster, and at a greater rate of return, than the S&P 500.

And that's if you look historically at that laddered index that we are trading on swap, again, with JP Morgan. It's the same construct as our other income producing instruments. This one is solely focused on growth. There's an interesting rule. A lot of advisors, if you're, listening to the podcast, a lot of advisors will have the rule of seven. Which essentially means that the S&P 500 historically has doubled about every seven years.

So, just doing back of the envelope math, if you take $10,000 and you're 25. And you've got until 65, you've got 40 years to compound. So you've got seven years inside those 40 years that might allow you to compound let's say eight times or nine times. So that $10,000 will turn into about $640,000.

That's a great thing. If you go the CAGE strategy, you can compound even more times. And so you may end up with, if you're compounding every four or five years, about $5 million. And so you can see the difference just compounding a couple extra times, using the CAGE strategy used versus the S&P 500 strategy. You can end up in a remarkably better place, if you have time on your side.

[00:06:00] Doug Heikkinen: Can you walk me through how CAGE works and what happens to CAGE, C-A-G-E in a bear market?

[00:06:07] Matt Kaufman: So, I think we'll take it in two parts. We can talk through, what is a growth note? And then we will go through how CAGE operates.

So an autocallable growth note is a lot like a bond that's tied to the equity markets. So it will pay a set coupon. In this case, the coupon is paid annually and it returns your par back either when you're called away, at that annual observation period, or at the maturity of the note, which would be five years in this case.

So that's going to be true as long as the reference index that this note is tied to does not fall below a set barrier. So in our case, it's a minus 50% maturity barrier. so a growth note again, is a lot like a bond that's tied to equity markets. But again, the coupon is not paid out. That would be an income producing note. This is a growth note. It goes back into the portfolio and just simply accumulates and compounds inside of the product.

So let's play this out. In the past we've used some monopoly money analogies, so maybe we'll just keep on that trend here. So, Doug, if you give me $100, that would be your investment.

And that coupon on that $100 right now is around 28%. And so we will build you a five year note here that has a five year maturity, a one year non-call period, and then at the end of that year, it's an observation date. So let's fast forward one year. You're going to get $28 if the market is positive. Then that note will be called, autocalled, just like the product implies, and you're going to get $28 and your $100 back inside the portfolio.

Good trade for you. $128 out of $100. What if the market's down? So one year from now, if the market's down, you do not get that $28, but it's not gone, it's not lost. It actually will be stored in what's known as a memory feature. It's stored for later. So let's go on to year two now. If the market's positive in, at the end of year two, the reference index, then you're going to get 28 times two.

You're going to get both coupons, $56 now. So it's not like you lost the first $28. You might think of it like a rain check for your paycheck, if I can use something for people to remember. And then if it's still not positive, you get zero for that second year also. But again, the coupon is stored.

So let's go to year three. Reference index positive, well now you get $84 banked to your account, so you can see the remarkable power of the memory feature that's built in here. So even though you might not be participating in that growth every year, because the market might not be positive, you're going to aggregate those.

And so by the third or fourth year, if the market shoots positive, which, you know, it tends to do over time, you're going to collect a remarkable upside. So that's how the product is designed to work. And then, where does the risk lie? The risk lies that if the market is down by more than 50%, that's that barrier at the end of the fifth year.

So playing back our Monopoly money scenario, this would mean that the market would never have been positive in each of those observations for five years in a row. And then as long as it's not down by minus 50%, you're going to get par back on those bonds.

And so we've built a laddered index with MerQube, a big index provider. We trade that on swap with JP Morgan, and that gives you exposure to a weekly laddered basket of these five year autocallable growth notes. So every week you've got a look point, you've got something that you're reviewing.

We have a tool on our website you can use to see exactly where all of these are trading. But again, this is a buy and hold vehicle. And so over time, you're going to capture a remarkable amount of growth. The other thing I want to point out. Again, we've got that one every week. So you've got all of these checkpoints.

It can create a little bit of volatility in the NAV. So that will hit on your next question. 1.4 beta means that the volatility is going to be there. I mean, that's how you're going to generate this high level of growth in your portfolio. But think of it a lot like a pull to par effect.

So you've got that 50% downside barrier protecting your principle. Going back to 2005, we have never seen a 50% correction in the reference index that we are using over that five year period. The risk of you breaching principle going back to 2005 was 0%. So we have built this with a high degree of safety around preserving principle.

It does not mean that the NAV won't move around. So the NAV will move, it will have volatility.

But the difference here, another statement advisors make is if the market falls by 50%, how much do you need to recover? You need a hundred percent recovery in the market in order to go back to even. Well think about that in context of a bond that's trading at a discount to par.

If the market drops by 49%, what's going to happen in the notes here? You're going to accrete back to par. You're going to snap back to par even if the market does not recover. And so that's a tremendous value to a growth note strategy where, in a normal S&P 500 investment, in any equity investment, the market falls by a lot. Volatility can erode those returns, because you need a significant recapture, you need a significant up move to recapture that downside move.

You do not need that in the autocallable growth notes because it truly is like rubber bands trading at a discount to par pulling down. They're going to snap back to par. So if the market ends down 49%, you're going to end at zero. You're going to end flat, you're going to get your par back. It's remarkably powerful. And when you can understand those three concepts, a laddered portfolio, a memory feature, a pull to par effect, you can understand how you would've gotten roughly a 22% average return over the last 10 years or so.

[00:12:19] Doug Heikkinen: That's a great explanation and it sounds like a remarkable retirement savings tool. So if I'm an advisor, which one of my clients benefit from CAGE and where does it fit?

[00:12:31] Matt Kaufman: Yeah, that's a great question. So, anyone with a long-term savings goal. Anybody looking to compound growth over time, this is a remarkable vehicle for doing that.

So, my wife and I have seven kids. We've got a big family. Each of them are getting a little bit of CAGE. They're not going to know it. And hopefully they'll wake up 25 years from now, will be in a remarkable spot. Maybe they can use that for a down payment on a house or hang onto it and just continue compounding. So that's the type of thing that we're thinking about. Somebody with a five year time horizon or longer.

If you look at the index that we're trading on swap with JP Morgan, over five year rolling periods, you never would have breached principle. That again does not mean that the NAV doesn't move. It will move on you.

You'll draw down at a discount to par with the market, but you're not going to be using that money, you're not going to be capturing that, taking that money out at that draw down. So we're going to hold that for at least five years. And I would say typically better than the S&P 500 over time.

[00:13:38] Doug Heikkinen: Okay. Last one for you. How do you think about this relative to maybe a 2x leveraged ETF or those type of products?

[00:13:47] Matt Kaufman: Sure. Yeah, that space is interesting on the leverage side. When you enter into those 2x type products, you're getting a daily or sometimes a weekly leveraged exposure.

You have a lot of volatility drag that's built into those products. So those were really never designed to be a long-term buy and hold experience. The volatility in those products on a daily or weekly basis create what's called a vol erosion in the product. And it will not deliver over time what it says that it's going to deliver.

And so this product, with CAGE, it can actually deliver a better experience over time. If you're looking for enhanced exposure, amplified exposure to the S&P, this is a buy and hold way to actually achieve that over time. There is no leverage in the ETF. We are not giving you 2x upside via buying more of the upside there on the ETF.

This is simply a way to grow faster than the S&P over time, via really high coupons that are going to be credited to you when the market is positive and stored when the market is not.

[00:14:58] Doug Heikkinen: Matt, congratulations on the Calamos Autocallable Growth ETF. It sounds like a fantastic product. Thank you so much for being with us today.

[00:15:09] Matt Kaufman: Thanks, Doug. Appreciate it.

[00:15:10] Doug Heikkinen: To learn more about Calamos, please visit Calamos.com. Thank you for being with us today. For our producer Tory Miller, I am Doug Heikkinen.