John Calamos built his firm, Calamos Asset Management, into a runaway success.
But by doing so he placed his heirs in a precarious position; if he were to die
with most of his wealth locked in the family firm, they would be forced to
dismantle it to pay estate taxes.
Just two years ago, most of John P. Calamos’ personal fortune, then about
$2.1 billion according to Forbes magazine’s rankings, was tied up in his
investment firm, Calamos Asset Management. “The wealth that we have created as a
family has really been in this business,” Calamos says. But despite not being
ready to retire at 65, he came to realize that having the family’s wealth in an
illiquid asset could prove disastrous to the firm—and the family—if he were to
die unexpectedly.
 Calamos’ parents were Greek immigrants who opened one of
the first grocery stores in their Chicago neighborhood. As a child, he delivered
groceries, stocked shelves and swept floors. He first dabbled in the markets as
a teenager, when he convinced his mother to let him invest $5,000 of the
family’s savings. He invested profitably in five growth stocks, which he held
for several years. Calamos eventually earned an MBA in finance and found a job
as a broker, a field in which he would develop a specialty in the then-niche
market for convertible bonds. He would build his reputation as a leading
investor in the market for these complex securities after he established his own
firm in 1977.
His firm today has nearly $50 billion in assets under
management and 331 employees, but it remains very much a family operation.
Calamos holds the roles of chairman, CEO and chief investment officer. His son,
John Jr., helps run the firm’s nine investment funds. His nephew, Nick Calamos,
is co-CIO.
Success and Succession
Calamos was determined to keep the business in
family hands, so as the firm grew and he amassed his wealth, he was dismayed to
realize that with a major portion of his net worth tied up in a very valuable
business, his heirs would, in all likelihood, be forced to sell the firm to pay
estate taxes if he were to die without a plan. (Using published estimates of his
net worth as a guide, his family would have owed about $900 million in federal
estate taxes in 2004.) He could not gift enough of his wealth to his family or
buy an adequate amount of life insurance to provide the capital they would need
to pay an estate tax levy of that size.
Since the mid-1980s, Calamos had been
a member of The Executive Committee International (now Vistage), an
organization that brings together CEOs in regional groups for peer-to-peer
discussions about business concerns. Succession planning emerged as an important
theme, and, at the suggestion of the group, Calamos created an advisory board
composed of three independent directors to think strategically about his
business. The advisory board proposed taking a small portion of the company
public to raise capital. Calamos agreed, and put the idea before his full board,
which approved it unanimously.
The 2004 IPO spun off a 23 percent stake and
raised $414 million. The family retains the remaining equity in the firm’s
holding company, Calamos Family Partners, of which Calamos, his son and nephew
are principals. Though some industry analysts, including John Bogle, the
Vanguard funds founder-turned-author and financial cynosure, have raised
concerns about the extent of the family’s control, the stock has performed well.
After debuting at $18 per share, it was recently trading around $32, down from a
high of $44.
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