The Billionaire Next Door
When John Calamos took his mutual-fund company public in 2004, not only did he join the ranks of the world's richest people; he also invited the kind of scrutiny and criticism he had never faced as a private businessman
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Hefty CEO pay packages and even some insider deals would be easier for shareholders to stomach if Calamos Asset Management were living up to its self-definition as a growth company. But in the first quarter of 2007, the company's net income was $7.5 million, down 16 percent from the year before. During that same period, revenue dipped 4 percent to $115.7 million. In addition, assets under management that quarter dropped to $42.6 billion, compared with $47.6 billion the year before. As of June, the stock was down 7 percent to the $26-per-share range for the year.
The culprit appears to be the slowing Calamos Growth Fund, the flagship that accounts for 36 percent of the company's managed asset base. Started in 1990, the fund is a mix of stocks in large and midsize domestic firms. During its heyday, Calamos Growth Fund lived up to its name by racking up eye-popping returns of 77.7 percent in 1999 and 42.3 percent in 2003. But as the fund's assets have grown from $6.7 billion in 2004 to this year's $15.4 billion, its returns have tapered off, and last year it posted a meager 1.5 percent gain.
As of mid-June, the fund was up 12 percent for the year, but even at that clip it was lagging behind competing funds in a robust stock market, points out Ptak, the Morningstar analyst.
Goldman Sachs is especially down on the fund. In recommending that clients sell their Calamos shares, Goldman predicts the Calamos Growth Fund will "be a drag" on the balance sheet for a while.
"This is an inflection point for them," says Ptak.
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During an interview at his company's new headquarters-a striking, glass-walled mid-rise-John Calamos insists he sees no need to change the company's fundamental approach, and he doesn't apologize for its recent performance. He argues that hard work, family values, and life experiences have steeled him to overcome the current troubles and withstand criticism. At 5 feet 11 inches tall with a trim build and sporting a close-cropped beard tinged with gray, he backs his words with a brisk and direct manner.
He says his payout was determined by the board of directors' compensation committee and he disagrees with assertions that he is paid above the going rate for heads of companies the size of Calamos Asset Management. "On our compensation, we do peermetrics. There's no way we're not in line with those comps." (Calamos Asset Management has a six-person board with four outside directors.)
Calamos also dismisses investor wariness about insider deals. He notes that the aircraft leasing and real estate ventures were outlined in the company's IPO, available for examination by any and all investors. "We went to great pains so all those things were done in a transparent way," Calamos says. He adds that his company was being up-front about its business transactions long before Congress added disclosure requirements for public companies in the aftermath of the Enron debacle.
At the suggestion that his company is losing a step and is no longer on a growth track, Calamos gets a little frosty. Although he concedes that the Calamos Growth Fund had a tough year in 2006, he points out that the fund's stock portfolio is coming back this year.
Meanwhile, he says, Calamos Asset Management is looking to build up its business base by expanding into new investment areas-among them, a hedge fund and more international investments. "We own 77 percent of the company; do we care what happens? You bet," he says. "Do we think we're a growth company? You bet."
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