The fund targets net returns of Libor plus 4 to 6 per cent a year by investing in 12 to 20 Ucits III hedge funds that typically have low correlation with equities and bonds. Gam groups them in to four sub-strategies. Macro discretionary srategies comprise the bulk of the portfolio and typically take a top-down approach to analyse markets and tend to use very liquid assets such as derivatives. They are built on the manager’s views rather than a computer-based model.
Macro systematic strategies use a computer-based model to identify situations where historical relationships between asset prices have broken down. Managed futures trend Strategies and managed futures short term strategies also used computer models but the former will look at market trends while the latter will look at the short-term mispricing of assets.
.Due diligence and research is at the heart of Gam’s process. The firm says its focus on talented managers often leads to new managers and strategies, but it is selective and invests only in around 5 per cent of the total funds it sees.
Gam’s team, which has over 20 years’ fund of funds experience, should have plenty of choice given the growth in Ucits III hedge funds. However, the regulated structure provides limitations, such as the ability to take short positions only using derivatives, so performance of the underlying funds may not follow non-Ucits portfolios run by the same managers.