GAM Star diversified market neutral credit is run for GAM by US manager DCI. It aims for absolute returns that are uncorrelated to fixed income markets by investing in a long and short portfolio comprising mainly investment-grade corporate bonds. The fund targets returns of 5 to 8 per cent a year above Libor and will use credit default swaps to take short positions.
DCI uses quant systems developed by its managing partner and chief investment officer Stephen Kealhofer to look at the probability of default among companies issuing bonds and to estimate the value of bonds, which is compared to the current market price. It will use information from both equity markets and corporate bond markets to calculate credit risk. The information is interpreted by DCI, who will then take long and short positions in bonds that appear to be mispriced by the market in general.
The fund’s market neutral strategy, where DCI can take offsetting long and short positions, is intended to limit the fund’s sensitivity to market moves. Returns are expected to have low correlation to fixed income and equity markets, and low volatility in general. The investment-grade focus offers something different but some investors may prefer the flexibility of a ‘go anywhere’ mandate.
GAM Star absolute global emerging markets will focus on the Bric economies and other markets such as Turkey and Egypt. It will be managed by GAM investment director Sean Taylor, who joined Gam in 2004, and has over 18 years’ emerging market equity experience.
Taylor will run the fund on an unconstrained, thematic basis that combines top-down global, regional and local views with bottom up stockpicking. He will explore three themes – structural and domestic plays, cyclical ideas and opportunities in new emerging markets.
The recently-launched Schroder GAIA Sloane Robinson Emerging Markets fund could provide competition, but it has a bias towards long positions, does not take a thematic approach and at 2 per cent, its annual management charge is 0.5 per cent higher than GAM’s.