The bond funds making double-digit gains despite a challenging 2017

"Topping the table is GAM Star Credit Opportunities EUR, which is an IA Global Bond fund run by FE Alpha Manager Anthony Smouha and Gregoire Mivelaz. The fund, as well as the GBP version of the product (which is in the IA Sterling Strategic Bond sector), has a specialist approach that focuses on the junior and subordinated debt of investment grade companies.

The belief behind the process is that there is a very low likelihood that quality financial companies will default on their debt, therefore the portfolio can pick up extra carry by holding lower tier debt issued by these businesses.

GAM Star Credit Opportunities EUR has established a strong track record on the back of this process: not only is it the best performing bond fund over 2017 but is one of the IA Global Bond sector’s top three performers over one-, three- and five-year time frames.

In their latest update, Smouha and Mivelaz argued that the portfolio could hold up if bond yields do start to tick up. “We continue to monitor the possibility of rising generic yields,” they said. “However, we also expect that the income offered by our portfolio with its blend of fixed-rate, fixed-to-floating bonds and discounted floating-rate notes will provide an attractive return as well as the potential for capital gains.”

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