GAM Star Credit Opportunities seeks to generate steady, high income from the bonds of quality companies, with a focus on junior or subordinated debt to capture higher yields. The suite of three long only UCITS is managed by corporate bond specialist, Atlanticomnium S.A., whose careful bond selection, biased towards the financials sector, results in a liquid, diversified portfolio with low duration risk.
Atlanticomnium has one of the longest track records available, having successfully managed the strategy since 1985.
Fund managers have more than 60 years’ combined investment experience, supported by an investment team with in-depth knowledge of debt markets and issuers and strong experience of credit analysis.
The fund enables access to some of the best opportunities in bonds from banks and insurance companies, as well as corporates.
The fund is a long only, daily dealing UCITS fund, offering both accumulation and income share classes.
Buy and hold long-term investment approach, based on strong credit convictions, consistency of the investment philosophy and structure of the strategy over time.
Fund managers, Anthony Smouha, Gregoire Mivelaz and Patrick Smouha, have over 60 years' combined investment experience. The primary source of added value for the portfolios is the bottom-up credit selection ability of the managers and their familiarity with junior debt.
They are supported by a team of analysts and strong dealing capability, as well as other internal resources. An additional risk oversight function is performed independently by GAM’s risk teams.
With a focus on high-quality financial issuers, current valuations of our securities provide attractive yields while their credit fundamentals remain rock solid. Financials remains one of the strongest sectors within credit markets, and with balance sheets strong enough to bridge central banks’ lending, can be part of the solution to the current crisis.
The team believes that attractive yield can be captured from corporate bond investing without incurring unnecessary default or interest rate risk. Investing lower down the capital structure, where upside payoffs can be enhanced if a company succeeds, means going beyond the traditional credit approach and understanding not only a company’s creditworthiness, but also its fundamentals. The team believes that targeted, fundamental credit analysis focused on the corporate quality and capital structure of investment grade companies can potentially harness strong total returns.
The bottom-up process uses in-depth fundamental credit analysis to identify conviction issuers with strong credit metrics favourable to bond investors. Research is focused on mitigating downside risk in line with the team's capital preservation objective. The team performs a deep-dive analysis of individual bonds to find the most attractive ones within the capital structure, including a detailed understanding of the prospectus, issuers’ capital structure and regulatory framework. Positions are selected and sized to achieve income and capital appreciation potential, as well as to manage and mitigate credit interest rate and liquidity risk via diversification. The last step of the process is risk control and portfolio monitoring where the investment team monitors the credit quality of issuers, allocations and risk parameters of the fund as well as adherence to UCITS regulations, the restrictions laid out in the fund's prospectus and the team's internal limits.
With global interest rates widely seen to be at - or very close to - their peaks as inflation worries ease, bonds now offer investors an opportunity to lock in highly attractive levels of yield.
Capital ratios
With excess capital at all-time highs, we believe bondholders have never been safer.
Non-performing loans are low
More than a decade of de-risking has led to a radical clean-up of banks’ balance sheets.
Liquidity
Far exceeds requirement for European Banks’ average regulatory liquidity ratios.
Bonds may be subject to significant fluctuations in value. Bonds are subject to credit risk and interest rate risk.
Non-investment grade securities, which will generally pay higher yields than more highly rated securities, will be subject to greater market and credit risk, affecting the performance of the Fund.
A rise or fall in interest rates causes fluctuations in the value of fixed income securities, which may result in a decline or an increase in the value of such investments.
Some investments can be difficult to sell quickly which may affect the value of the Fund and, in extreme market conditions, its ability to meet redemption requests.
Concentration in a limited number of securities and industry sectors may result in more volatility than investing in broadly diversified Funds.
All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.
The implications of this low growth inflationary environment are actually very good for the financial sector. What we're seeing is rising rates are boosting profitability.
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AT1 contingent convertible bonds (CoCos) were in the news in the first quarter of this year following the takeover of Credit Suisse by UBS. Atlanti’s Head of Research Romain Miginiac says that despite this, the AT1 market remains viable and attractive within the subordinated debt of European financials.
10 min read
At GAM Investments’ latest Active Thinking forum, David Dowsett reviews the market reaction to the recent monetary policy decisions and US payrolls report, while Romain Miginiac outlines the dual benefit of green bonds, namely their ability to generate a positive environmental impact while also providing exposure to the financial sector which he believes offers an attractive risk/return opportunity in the current environment.
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Disclaimer: Past performance is not an indicator of future performance and current or future trends. The indications could be based on figures denominated in a currency that may be different from the currency of your residence country and therefore the return may increase or decrease as a result of currency fluctuations. Capital at risk: all financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed. Any reference to a security is not a recommendation to buy or sell that security.
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