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Monday, November 7, 2011

GAM adds to its UCITS offering with cat bond fund launch

  • The GAM Star Cat Bond seeks to provide attractive returns that are independent of capital markets
  • The fund is managed by Fermat Capital Management, recognised as an industry leader with unique capabilities in this specialised asset class
  • The fund provides investors with an opportunity to access securitised insurance risk through a regulated vehicle

GAM today launched the GAM Star Cat Bond, a UCITS-compliant fund that aims to deliver stable and very attractive cash plus returns that are not impacted by the volatility and performance of more traditional equity and fixed income instruments. The fund is the most recent addition to GAM’s growing UCITS range and provides investors with an opportunity to access securitised insurance risk through a regulated vehicle.

The fund is managed by one of the leading names in the insurance-linked securities (ILS) market, Fermat Capital Management, LLC (“Fermat”), and invests in securitised insurance risks via a portfolio of 40-50 cat bonds. The underlying bonds transfer the remote risk of natural disasters from re/insurers to the capital markets and offer higher yields compared to similarly rated traditional securities. Returns from these bonds are driven by the absence of well-defined, extreme natural events. Their performance is therefore largely independent of financial market behaviour, and consequently they have a very low correlation to traditional asset classes even in times of crisis.

Dr John Seo, Co-Founder and Managing Principal at Fermat Capital Management, said: “In today’s investment environment, where the performance of traditional and even many alternative asset classes are converging, cat bonds have demonstrated their ability to produce attractive and stable returns across turbulent market conditions. The key is to construct and actively manage a portfolio with risks that are well-understood, extensively modelled and adequately compensated.”

Craig Wallis, Global Head of Institutional & Fund Distribution at GAM, commented: “Fermat is one of the most experienced insurance risk managers in the world and they have been managing an offshore strategy for GAM since 2004. The outstanding performance of their strategy, especially during the recent difficult periods for traditional assets, has demonstrated the value of this asset class to a client’s portfolio. The launch of our UCITS offering will improve the accessibility of this attractive and interesting source of return.”