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Absolute return aversion drives GAM fund outflows

Absolute return aversion drives GAM fund outflows

A move by investors out of absolute return strategies was the big news as GAM reported a fall in assets under management for the first half of 2016.

The Swiss investment firm said turbulent markets had led assets across all capabilities to drop from CHF72.3 billion (€66.79 billion) in December 2015 to CHF65.5 billion (€60.51 billion) in the half-year figures.

The largest area of outflows was in the absolute return sector, where redemptions from the firm’s absolute return/unconstrained strategies totalled CHF2.6 billion (€2.4 billion) for the sixth-month period.

In the analysis, GAM said these redemptions were driven, in part, by the overhang of poor performance in 2014, while it said performance was improving at the beginning of 2016.

One of the most prominent absolute return funds in the now CHF19.2 billion (€17.7 billion) fund range is the JB BF Absolute Return fund, which is co-managed by Daniel Sheard and Timothy Haywood, and has €3.32 billion (CHF3.6 billion) in assets under management.

On a three-year total return basis, the fund has lost 4% in euro terms, while the average manager in the bond strategies sector returned 3.5% over the same period to the end of June 2016.

The Swiss firm said it was not alone in its decline, with the JB Absolute Return Europe Equity fund – which is jointly managed by Andy Kastner, Alain Beyeler and Desiree Muller – and Adrian Owens’ Global Rates strategies also recording net outflows.

On the flipside, the GAM Star Keynes Quantitative Strategies and GAM Star European Alpha funds posted modest inflows for the period.

Fixed income products, which account for CHF19.3 billion (€17.8 billion) of overall assets, saw modest redemptions as investors moved out of developed world debt. However, the firm said this was cushioned by emerging market and specialist funds.

Equities also experienced outflows of CHF1.6 billion (€1.4 billion) and had a closing AuM of CHF10.7 billion (€9.8 billion). GAM did highlight how Niall Gallagher’s GAM Star Continental European Equity fund, as well as the GAM UK Diversified fund, had seen increased investor interest.

Elsewhere, thematic and regional funds suffered, with broad outflows from Michael Lai’s GAM Star China Equity fund, the JB Japan Equity and the GAM Star Technology funds being the most noteworthy.

Multi asset class solutions posted net outflows of CHF1.0 billion (€0.9 billion) for the period, while alternatives saw a drop of CHF0.2 billion.

Commenting on the overall results, Alexander S. Friedman, group CEO, said: ‘The turmoil we have been seeing since the second half of 2015 is likely to continue affecting clients' risk appetite, flows and assets.

‘Our utmost attention over the coming months will be directed to our clients, investment performance, tight cost control and the integration of new capabilities.’

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