Chill, et al. v. Calamos Advisors LLC

Analysis Group was retained on behalf of Calamos Advisors (Calamos), the defendant in a mutual fund fee litigation. In this matter, shareholders in the Calamos Growth Fund alleged that Calamos received excessive investment advisory fees from the fund that violated of Section 36(b) of the Investment Company Act of 1940. Among other things, the plaintiffs alleged that these advisory fees bore no relationship to the services that Calamos provided to the fund, and that the fees were outside of the range that could have resulted from an arm’s-length bargaining.

An Analysis Group team led by Managing Principals Michael Beauregard and D. Lee Heavner – and including Principals Marnie Moore and Rebeccah Filsoof, Vice Presidents Hristina Bojadzieva Bartlett and Sumon Mazumdar, and Senior Advisor James Rosberg – supported five academic and industry affiliates, all of whom filed expert reports, testified at deposition and trial, and critiqued the submissions of the plaintiffs’ experts.

  • Kevin Cronin opined on the evolution of fund management in the investment management industry, and on whether Calamos’s investments and reorganization efforts involving its portfolio management team and investment management processes were reasonable and appropriate ways to improve the quality of services provided to the Calamos Growth Fund and its shareholders.
  • Professor Glenn Hubbard assessed the fees paid by the Calamos Growth Fund to Calamos from an economic and a comparative perspective. He testified on several topics, including competition in the mutual fund industry, the economics of bundled products, economies of scale in mutual funds, and indicia of the nature and quality of the services Calamos provided to the Growth Fund. Professor Hubbard also opined that the fees Calamos received for providing services to separately managed account and sub-advisory clients are not apt comparators for evaluating the Growth Fund’s fees.
  • Professor Arthur Laby opined on the reasonableness of the process that the Calamos Growth Fund’s directors utilized in evaluating and approving the agreements between the fund and Calamos. This work included evaluating the quality of the information provided to the fund’s directors.
  • Professor John Lacey opined on the reasonableness of Calamos’s methods for allocating shared costs across the various product offerings and the resulting calculations of fund-level profitability. He also opined on whether the cost allocation methods and profitability measures used by Calamos were consistent with managerial accounting principles.
  • David Richardson opined on the services Calamos provided to mutual funds and sub-advisory and institutional clients, and whether the nature of those services and the associated fees were consistent with industry practice.

After a two-week bench trial, Judge Edgardo Ramos of the US District Court for the Southern District of New York dismissed the plaintiffs’ claim in its entirety, holding that they had “failed to prove that Calamos breached its fiduciary duty under Section 36(b).”