Executive summary

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  • 1. Please characterise your strategy in terms of:

    Investment Objective : The fund seeks to achieve high income generation with capital appreciation
    from investing in bonds of high quality companies

    Asset Class Fixed income – Specialist credit / Corporate bond

    Benchmark For performance comparison purposes only, each of the funds uses the relevant Barclays Aggregate Corporate Total Return Index in USD, EUR and GBP

    Investment Universe Publicly quoted corporate bonds of any credit quality issued predominantly
    by investment grade companies, with a particular focus on the financial sector and specialist areas such as undated, floating rate and fixed-tofloater debt instruments

    Number of Holdings Each of the three GAM Star Credit Opportunities funds is highly diversified
    to a level suitable to the characteristics of the underlying markets in which it
    invests, typically hundreds of securities.
    Portfolio Concentration Approximately 30% of portfolios in top 10 issuers
    Standard due diligence questionnaire for GAM Star Credit Opportunities funds : USD, EUR and GBP 5

    Maximum Position Size UCITS limits  Maximum 10% of NAV in transferable securities and money market
    instruments issued by the same body subject to the 5/10/40% rule. There are higher limits for the likes of government issued or
    guaranteed securities and also for deposits. Maximum 10% of the debt securities of any single issuing body

    Liquidity The majority of instruments are liquid or very liquid, in line with daily dealing
    of the funds. The investment team estimates that the majority of each fund
    could be liquidated in a few days without adverse price impact.

    Instrument Types Used Mainly corporate bonds, with limited exposure to convertibles, derivatives
    (currency forwards only) and cash

    Hedging Able to use currency forward contracts to hedge the currency risk of nonbase currency assets. Derivatives have not been used to hedge interest
    rate risk as inclusion of fixed rate and floating rate bonds provides natural hedge.

    Leverage (Typical Gross / Net Exposure) The funds do not borrow to invest and do not leverage their positions to generate a notional exposure in excess of their NAV.

    Duration There is no duration target.

    Volatility There is no volatility target.

    Source: GAM

    There is no guarantee targets will be achieved.

    Please note these are internal guidelines only. The mentioned financial instruments are provided for illustrative purposes only and
    shall not be considered as a direct offering, investment recommendation or investment advice. Allocations and holdings are subject
    to change Standard due diligence questionnaire for GAM Star Credit Opportunities funds : USD, EUR and GBP 6

  • 2. What are the key strengths of your investment strategy?

    The investment team’s primary strength is their different view on bond investing: safe investment grade companies have low default risk which extends to both senior and junior debt, but junior debt pays more income and allows more nimble interest rate exposure management. This asset class of hybrid and junior subordinated debt offers a rich and growing opportunity set as companies increasingly use them as a lower cost alternative to raising equity. However, many investment guideline constraints and required expertise to analyse the specific features of prospectuses means that only a certain set of market participants can invest in them. The fund managers harness not only the higher yield these bonds pay, but also their unique features, such as being undated, floating rate or fixed-to-floater debt, to calibrate their portfolios’ interest rate exposures over the market cycle.

    1 The full legal names of the funds are GAM Star Fund plc. – GAM Star Credit Opportunities (EUR), GAM Star Fund plc. – GAM Star
    Credit Opportunities (USD) and GAM Star Fund plc. – GAM Star Credit Opportunities (GBP).
    Standard due diligence questionnaire for GAM Star Credit Opportunities funds : USD, EUR and GBP 2
    The managers have a clear focus on income as well as price, instead of on price alone and a buy and
    hold bias meaning that over the long term, incremental payments of coupons add up, contributing
    significantly to total returns – which is a much more reliable approach than depending on favourable bond
    price movements or trading in and out to drive performance.

    The managers’ approach to credit analysis is also different: they take a holistic, total return approach
    when deciding which bonds to buy. With their buy and hold bias, they believe the traditional ‘credit analyst
    mentality’ of examining payoffs if the company defaults is only one side of the story. Given their flexibility
    to invest in different levels of the credit structure, they also consider carefully what payoffs different bonds
    will provide if the company thrives, to get a clear view on the potential upside.

    Finally, the investment team’s non-benchmarked approach ensures their efforts focus solely on areas
    where they see the best opportunity, for instance in financials. It has also enabled them to cultivate deep
    expertise in the sectors and companies that tend to issue hybrid debt. This freedom to invest according to
    conviction has produced a compelling alternative approach to traditional high income bond investments.

    Focus on income

    Historical rolling annual accrued income for GAM Star Credit Opportunities (USD) since inception:

    Source: GAM as 30 June 2019.

    Past performance is not an indicator of future performance and current or future trends. The gross performance does not include the
    effect of commissions, fees and other charges, which may have a negative effect on the net performance.
    Rolling annual accrued interest is calculated based on summing the quarterly figures as opposed to compounding.
    Standard due diligence questionnaire for GAM Star Credit Opportunities funds : USD, EUR and GBP 3

    Historical rolling annual accrued income for GAM Star Credit Opportunities (EUR) since inception:

    Source: GAM as 30 June 2019.

    Past performance is not an indicator of future performance and current or future trends. The gross performance does not include the
    effect of commissions, fees and other charges, which may have a negative effect on the net performance.
    Rolling annual accrued interest is calculated based on summing the quarterly figures as opposed to compounding.
    Historical rolling annual accrued income for GAM Star Credit Opportunities (GBP) since inception:

    Standard due diligence questionnaire for GAM Star Credit Opportunities funds : USD, EUR and GBP 4

    Source: GAM as 30 June 2019.

    Past performance is not an indicator of future performance and current or future trends. The gross performance does not include the
    effect of commissions, fees and other charges, which may have a negative effect on the net performance.
    Rolling annual accrued interest is calculated based on summing the quarterly figures as opposed to compounding.

  • 3. What is your competitive advantage?

    The strategy’s key competitive advantages are:

    1. Highly experienced, corporate bond specialist team with three co-fund managers who have a combined investment experience of 60+ years, supported by a team of analysts and strong dealing
    capability.
    2. Clear focus on and track record of minimising default risk while maximising total returns
    3. Fundamental credit analysis expertise and experience to benefit from the growing diversity in companies’ capital structures
    4. Freedom and flexibility to pursue opportunities in under-researched, income-generative segments of
    the USD, EUR and GBP corporate bond markets.

     

     

     

  • 4. Give a brief overview of the strategy

    The GAM Star Credit Opportunities funds1 are corporate credit funds that seek to generate steady, strong income for investors. The managers’ approach is driven by the fact that investment grade companies rarely default, so by extension their junior debt rarely defaults. They use their extensive credit analysis experience to select junior or subordinated bonds of quality companies, capturing the higher yields on offer while benefitting from the low credit default rates. The result is a diversified, liquid portfolio which includes investment grade and non-investment grade, fixed and floating, senior and subordinated debt issues and has produced a track record of steady high income. Compared with other higher yielding fixed income strategies that source their yield from the debt of risky companies (e.g. junk bonds) or risky countries (e.g. emerging market debt), it is a compelling alternative.

    The three GAM Star Credit Opportunities funds are UCITS vehicles that each invests in bonds of different base currencies – EUR, USD and GBP – which were launched in July 2011. All three funds follow the successful investment strategy which has been managed by independent corporate bond specialist (Atlanticomnium) for over 30 years. Atlanticomnium has been managing assets for GAM since 1985 and are authorised and regulated by FINMA in Switzerland and the FCA in the UK.

  • Please read this important legal information before proceeding.

    Information contained herein are solely for the use of the person who has accessed this information and may not be reproduced or distributed, even partially, to any other person or entity.

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    The material contained herein is aimed at sophisticated, professional, eligible, institutional and/or qualified investors/intermediaries who have the knowledge and financial sophistication to understand and bear the risks associated with the investments described.

    The information is solely product-related and does not take into account any personal circumstances and does not qualify as general or personal investment recommendation or advice. In particular, the information is given by way of information only and does not constitute a specific legal offer for the purchase or sale of financial instruments. Moreover, nothing contained herein is constitutive of any tax advice.

    Every effort has been made to ensure the accuracy of the financial information herein but the information contained herein has not been independently reviewed or verified. Therefore, Atlanticomnium SA gives no assurance, express or implied, as to whether such information is accurate, true or complete and no responsibility is accepted by Atlanticomnium SA for any errors or omissions. Third-party content is the property of its respective provider or its licensor and is protected by applicable copyright law.

    Past performance is not indicative of future performance. The price of shares/units and the income from the funds/trusts can go down as well as up and may be affected by changes in rates of exchange or financial markets fluctuation, out of the scope of Atlanticomnium SA.

    To the fullest extent permitted by law, in no event shall Atlanticomnium SA or our affiliates, or any of our directors, employees, contractors, service providers or agents have any liability whatsoever to any person for any direct or indirect loss, liability, cost, claim, expense or damage of any kind, whether in contract or in tort, including negligence, or otherwise, arising out of or related to the use of the information provided.