GAM Investments has signalled a new focus on the retail market in Australia in its marketing program for 2018, in particular looking to promote more widely its successful GAM Absolute Return Bond Strategy.
Speaking at a briefing for advisers and investors in Sydney last week, William Morgan, a product specialist at Shed Enterprises, GAM’s Australian distributer, said that the global manager had raised a lot of money from Australian institutional investors over the past few years – more than $3 billion – and his firm would now look to widen the net for advisers and their clients.
“We’re looking at the best way to do that at the moment,” he said. “We’re looking at the appropriate vehicle to take advantage of the strategy’s liquidity.”
The GAM absolute return bond strategy, which totals A$14 billion globally, has been offered in Australia since 2006 and already has ratings from retail agencies but it is the major super funds that have been most attracted to it given the environment for bonds generally.
The strategy is able to make money in both rising and falling markets for bonds. “What we don’t much like is a sideways market,” Morgan said. “This is one of the few funds, in any asset class, which did well in 2008, for instance.”
He said the strategy, managed from London, used a variety of tools, probably the most important being protection. It was launched initially as a strategy for European private banking clients, who are notoriously defensive with their wealth.
In the current interest rate environment, with rates likely to rise off their record low base over the next year or two, even a small increase in global inflation, which is considered likely in the new year, could have a dramatic effect on the price of bonds, Morgan said.
This was not a market where investors should be taking beta bets, he said. The GAM strategy was flexible with duration, utilised derivatives to protect capital, and used a wide range of asset sub-classes, tools and techniques, Morgan said.
The asset sub-classes included bonds from developed governments, investment grade credit, high-yield bonds, emerging market debt, convertible notes and asset-backed securities.
‘Tools’ included futures, forwards, options, swaps and the volatility index. ‘Techniques’ included directional long positions, short positions, relative value strategies, arbitrage, short duration and protection.
Morgan said that of its few current long positions, Mexico, Brazil and South Africa were being helped by monetary policies, but the manager had scaled back its positions recently.
GAM believed that inflation was no longer falling in most of the developed world, he said, placing more upward pressure on yields.