The Dynamic Credit strategy is one of the first products Gam has launched since the firm was rocked by the abrupt suspension of star bond manager Tim Haywood last summer, which precipitated the liquidation of his CHF11bn (€9.5bn) Absolute Return Bond Fund (ARBF) range.
Gam described the new daily-dealing Ucits fund as “highly liquid”. The firm said it aims to outperform global credit markets on an absolute and risk-adjusted basis over the cycle but with downside risk mitigation. The strategy can take long positions in credit markets but will also have the ability to short less desirable markets.
Dynamic Credit will invest in US and European government bond futures and “the most liquid names” in a universe of 400 single name credits, Gam said.
One source told sister publication Portfolio Adviser they found it surprising Gam was releasing this product so soon after the Haywood saga.
The Dynamic Credit strategy is not categorised as an absolute return fund on Gam’s website but forms part of its Systematic platform, which is headed up by Anthony Lawler (pictured) and Adam Glinsman.
The Systematic investment team had $4.3bn (€3.7bn) in assets under management at 30 November 2018.
A spokesperson for Gam said the strategy had been launched at the earliest possible date following receipt of approvals across the UK and Europe.
Challenging credit markets
Gary Potter, co-head of BMO Gam’s multi-manager business, questioned the timing of the quant-based credit fund for another reason.
While he said the absolute return objective of the product at this point in the cycle is “logical”, he noted that we are entering a period of slower global growth which “isn’t necessarily the best environment for credit”.
He was similarly unsure how a long/short quant fund would perform in this environment.
“I get a bit twitchy when quant-based strategies are mentioned at key inflection points in the market,” Potter said.
Demand for diversification
Adrian Lowcock, head of personal investing at Willis Owen, said the blow up of the ARBF range was unlikely to have been behind Gam’s decision to launch a quant-based credit product.
“It takes time to develop a new idea and launch a fund and this is likely to have been in the works for some time,” he said.
Lowcock said the launch plays to the asset manager’s strengths in fixed income, while also utilising its quants systems, and most likely reflects client demand.
“Demand for such a product is going to be driven from institutional and discretionary investment managers,” he added.
Lawler cited the growing demand for diversification as the likely main reason why the fund was launched.
“Investors are increasingly looking for diversifying investments for their portfolios,” he said. “The dynamic credit strategy meets this need. It offers credit returns but is also equipped with crisis indicators which seek to reduce portfolio credit risk in challenging markets and thereby diversify returns away from traditional credit allocations.”
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