GAM Multi-Diversified LV is a low volatility, global, multi-strategy fund of hedge funds managed using the same disciplined investment process as GAM's flagship fund, GAM Diversity.
The fund targets returns of 3% to 5% per annum over LIBOR with volatility ranging between 2% to 4% per annum over rolling three to five year periods, with low correlation to equities and bonds.
It seeks to generate alpha and preserve capital during difficult equity market conditions. It is managed by GAM's multi-manager team. The fund is managed using rigorous and structured analysis of hedge funds in order to identify those with a strong competitive edge. GAM conducts detailed due diligence and research into both the investment and operational aspects of each underlying hedge fund prior to, and throughout, the investment process.
"This ensures that GAM Multi-Diversified LV maintains exposure to those funds in which GAM's Multi-Manager team has the highest level of conviction," says David Smith, GAM's chief investment officer.
The portfolio is constructed using a blend of sophisticated quantitative modelling and qualitative judgement, and is typically invested in 30 to 50 underlying hedge funds. These funds represent a strategic combination of the funds found in the GAM Diversity fund. However, in order to target lower volatility returns, the LV fund has a higher allocation to arbitrage funds and a lower allocation to equity hedge funds.
Within the portfolio of underlying trading funds, the LV fund has a higher allocation to systematic non-trend managers, who tend to display neutral or negative correlation to equity markets.
In all, GAM Multi-Diversified invests in three underlying hedge strategies.
Arbitrage strategies make up between 30% and 55% of the portfolio and aim to profit from mispricing between markets or related financial instruments. The aim is to generate consistent, incremental performance with low volatility.
Equity hedge strategies make up a maximum 45% of the portfolio, investing in both long and short equities. It typically performs best during rising equity markets. In falling markets, the focus is on capital preservation.
Between 15% and 40% of the portfolio is in trading strategies in a wide range of assets including equities, fixed income instruments, currencies and commodities. They typically have low or zero correlation with equity markets and bonds, specifically benefiting from periods of extreme volatile and difficult equity markets.
As with other GAM funds, risk management is threaded throughout the investment process to ensure each incremental risk in the portfolio is matched by expected returns.
"The final step in the process focuses on monitoring actual results against our expectations, with a view to continually improving the accuracy of these expectations," says Smith.
GAM's proprietary tools help aggregation and understanding of the drivers of risk and return, which in turn helps further build its in-depth understanding of the underlying funds and portfolios.
"Ultimately, each component of our risk management efforts supports our aim of enhancing the repeatability and robustness of our investment process," says Smith.
A dedicated risk manager provides an independent view on risk on all portfolios, conducting formal quarterly reviews with each manager.
FUND FACTS: GAM MULTI-DIVERSIFIED LV
Full name of fund: GAM Multi-Diversified LV - US Z Class
Name of portfolio manager: David Smith
Name of investment/management company: GAM
Contact: Shirley McLaughlin, 12 St James's Place, London, SW1A 1NX (+44 (0) 20 7393 8601; [email protected])
Launch date: December 2007
Assets under management: $109.8 million
Annualised return: 1.51%
Annualised volatility: 5.09%
Share classes: US dollar, euro
Administrator: GAM Fund Management
Auditor: PricewaterhouseCoopers (Dublin)
Custodian: Fortis Bank (Nederland)
Domicile: British Virgin Islands
Management fee: 1.6125% (excluding administration and custody fee)
Performance fee: none
Minimum investment: $25,000
Redemption period: monthly with 95 days notice