GAM Star Emerging Market Rates is an unconstrained, high-conviction emerging markets (EM) debt strategy, seeking to capture 70% of market upside while avoiding 80% of the downside with less than half the underlying market risk. The strategy uses a macro-based approach to take long and short positions across interest rate, currency or credit markets and has consistently provided superior risk-adjusted returns across cycles, while mitigating downside risk.
I think a big reason for the selloff in bonds in the core markets is this idea that we've got a huge amount of debt and huge deficits going forward. Generally, balance sheets in emerging markets are in better shape. I think there's some scope for outperformance on the back of that.
Led by Paul McNamara, the fund is managed by the exceptionally stable Emerging Markets Debt team. Since launch of the offshore fund in 2007 and the UCITS version in 2010, the team has consistently delivered on all investment targets.
The team’s extensive background of navigating economic cycles of crisis and recovery in EMD forms the foundation of their process, while a collaborative working style means that each person contributes to both research and portfolio management.
The team also actively leverages off the extensive investment insights and capabilities of GAM’s broader global fixed income teams
We seek to add value by disagreeing with the market and being right
The team’s thematic, macro-driven approach is founded on the conviction that developed economies drive emerging market fundamentals, valuations and market technicals and that these global themes should drive country selection and portfolio architecture. At a bottom-up level, the team believes most alpha potential can be unlocked by gearing qualitative and quantitative country research towards identifying and quantifying idiosyncrasies and turning points in economic cycles. The resulting investment views, opportunity sets and positioning may materially deviate from any prevailing market consensus.
Unlike most EM investment processes, the team starts not by analysing emerging markets, but by establishing 3-5 “Big 3”(US, Europe and China) top-down global themes to determine country selection and specific return and risk driver preferences. Extensive bottom-up country research, combined with a proprietary ‘crisis filter’, tests these views and seeks to identify potential country inflection points. These are further refined by considering valuation, technical and country specifics. The process typically results in a medium-diversified portfolio of 30-40 liquid single positions which may represent directional (long or short) or non-directional (relative value) top-down macro or bottom-up country views. Active risk management forms an integral part of decision-making throughout the process, and is supported by independent oversight by GAM’s risk team.
If a counterparty to a financial derivative contract were to default, the value of the contract, the cost to replace it and any cash or securities held by the counterparty to facilitate it, may be lost.
Derivatives may multiply the exposure to underlying assets and expose the Fund to the risk of substantial losses.
Bonds may be subject to significant fluctuations in value. Bonds are subject to credit risk and interest rate risk.
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.
The value of investments in assets that are denominated in currencies other than the base currency will be affected by changes in the relevant exchange rates which may cause a decline.
Emerging markets will generally be subject to greater political, market, counterparty and operational risks.
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.
9 min read
Following a tough 2022, emerging market debt has fared well so far in 2023, outperforming US government bonds and investment grade credit, particularly as some softer US data weighed on the dollar. Paul McNamara, Investment Director and lead manager on emerging market debt strategies, analyses the key factors affecting the asset class and shares his thoughts on what to look out for in 2024.
9 min read
At GAM Investments’ latest Active Thinking forum, David Dowsett argues that after a busy week for central banks, we could now be moving into a different era, while Paul McNamara discusses how the situation in the US, Europe and China will shape emerging markets and the longer-term effects of reshoring.
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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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