The investment philosophy for the GAM Star Credit Opportunities funds (the ‘funds’) is based on the fund
managers’ belief that attractive yield can be captured from corporate bond investing without incurring
unnecessary default or interest rate risk. They believe that targeted, fundamental credit analysis focused
on more complex bond issues from high quality issuers can harness strong total returns by:
- Investing in higher yielding issues of investment grade issuers
allows the managers to harvest yield from sub-investment grade issues, but to do so without the
default risk associated with lower quality companies.
- Focusing on income as well as price, instead of on price alone
A buy and hold bias means that over the long term, incremental payments of coupons add up,
contributing significantly to total returns – a much more reliable approach than depending on
favourable bond price movements or trading in and out to drive performance. Using hybrids to calibrate interest rate exposures
Hybrids, such as long-dated and undated bonds, offer a range of fixed, floating and duration
characteristics which can be used actively to position portfolio for market conditions at all stages of
the market cycle.
- Invest in the best opportunities, without regard for benchmarks
conviction-driven approach targets efforts solely on the areas of ripest opportunity; for instance, in the
financial sector, where regulations are enforcing structural quality improvements to support a deep,
varied range of quality bank and non-bank issuers.
Building on these beliefs for more than 30 years, the fund managers have been developing extensive
expertise analysing the corporate quality and capital structure of investment grade issuers. The resulting
highly diversified, conviction-based strategy has produced strong, long-term performance with attractive
yield and low default rates.