Our Approach
Risk Management
In agreement with the Irish authorities, the commitment approach has been selected to monitor and calculate on a daily basis the UCITS global exposure as well as to determine the position/issuer-concentration risk limits. Borrowings: no gearing in accordance with the UCITS regulation. Aggregated ratings: at least 40% of the net assets in securities are considered investment grade as defined by Standard & Poor´s. Position /issuer size: maximum 10% in any one issue and/or issuer. We monitor on a daily basis the following risks: liquidity, counterparty, position/issuer concentration, ratings, currency exposure/hedging, geographic exposure, and many other factors. On-going monitoring: We actively follow the companies bond/share prices, spreads, flows, news, earnings, rating actions, corporate governance, business momentum, conference calls, investor meetings and much more...

Risk Management and monitoring

In agreement with the Irish authorities, the commitment approach has been selected to monitor and calculate on a daily basis the UCITS global exposure as well as to determine the position/issuer-concentration risk limits.

Borrowings: no gearing in accordance with the UCITS regulation.

Aggregated ratings: at least 40% of the net assets in securities are considered investment grade as defined by Standard & Poor´s.

Position /issuer size: maximum 10% in any one issue and/or issuer.

We monitor on a daily basis the following risks: liquidity, counterparty, position/issuer concentration, ratings, currency exposure/hedging, geographic exposure, and many other factors.

On-going monitoring

We actively follow the companies bond/share prices, spreads, flows, news, earnings, rating actions, corporate governance, business momentum, conference calls, investor meetings and much more.

Credit risk

Credit risk is a key risk that the Team seeks to control and mitigate through the careful, bottom-up selection of the underlying positions in the portfolio. Credit quality is evaluated by monitoring companies’ newsflow eg. earnings, rating changes, roadshows and conference calls, enabling the Team to make decisions on both the relative and absolute value of individual companies and issues. Investment views of both the absolute and relative value of holdings and corporates are discussed and reviewed in weekly meetings, which also cover portfolio activity, research findings and direction of further research. On an ongoing basis, using the Bloomberg platform and published data sources, the Team monitors changes in:

  • Average credit rating: across the portfolio
  • Individual credit ratings: influences investor behaviour
  • Prices: stocks and bonds
  • Relative positions: to similar instruments and ratings

Should the Team have reason to anticipate a significant decline in credit quality, their policy is to sell down the position ahead of waiting for further negative news flow. This is one of the reasons why the Fund has experienced no defaults since inception. 

Liquidity risk

As a UCITS-compliant vehicle, the Funds offer daily dealing and the Team maintains a strong focus on liquidity. It is estimated that the portfolio could be liquidated immediately with potential for some price impact.

The investment managers further mitigate the liquidity risk through:

  • Portfolio diversification across approximately 300 - 350 holdings
  • Sizing of the positions in any individual instrument: largest positions rarely more than 5% of the fund and are typically less than 2.5%
  • Closely monitoring daily liquidity changes of the portfolio as a whole and of underlying positions

Quantitative Analysis Team

Portfolio risk is also measured and monitored by the GAM Quantitative Analysis Team, which is functionally independent of the Team. The Quantitative Analysis Team provides the following support:

  • Monitor and report on market risk across portfolios on a daily basis
  • Produce  monthly portfolio liquidity analysis
  • Produce daily, weekly and monthly investment and risk reports (should these go per MBL’s email)
  • Provide risk information and analysis to the investment managers, senior management, regulators and clients.

Credit risk is the primary risk inherent in the portfolio, as explained in the section about the investment process. This is primarily controlled by the careful, bottom-up selection of the underlying positions in the portfolio and a bias towards investing in economically strong countries.

The fund managers maintain a strong focus on liquidity given that the fund is daily dealing. It is estimated that the majority of the portfolio could be liquidated in a few days as the majority of assets fall into the category of very liquid or liquid. The fund managers further mitigate the liquidity risk through:

  • Portfolio diversification across approximately 190-230 holdings
  • Sizing of the positions in any individual instrument: largest positions rarely >5% of the fund and are typically <2.5%
  • Closely monitoring daily liquidity changes of the fund as a whole and of underlying positions

Derivatives have not been used to hedge interest rate risk. The variety of different bonds in the fund including fixed rate and floating rate bonds is designed to provide a natural hedge.

The other significant sources of risk which the fund may be exposed to include: 

Type of Risk Description Management and monitoring tool
Concentration risk Risk from uneven distribution of positions across a small number of individual issues, companies or sectors Portfolio diversification, with individual positions restricted to 10% of an issue and 10% of the fund, daily reporting
Counterparty risk Risk of counterparties defaulting Use only high quality counterparties and active monitoring of exposures and credit quality. Use of OTC derivatives in practice limited to currency forwards although others are permitted. Transactions on a DVP basis
Foreign exchange risk Risk of the value of an asset denominated in a foreign currency depreciating against the base currency Hedging typically through the use of currency forwards

Administrative and operational risks are also monitored by the middle office at Atlanticomnium.

Portfolio risk is also measured and monitored by GAM’s Quantitative Analysis team and they produce a monthly performance and portfolio report detailing performance attribution and various fund characteristics.

In addition, GAM’s Legal and Compliance team monitors the portfolio for adherence to its investment objectives and restrictions on a post-trade basis. GAM Star Fund plc is authorised by the Central Bank of Ireland pursuant to the European Communities UCITS (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, as may be amended from time to time, and is subject to UCITS restrictions and guidelines.

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Call us on +44 207 917 24 48 to speak with a member of the team; alternatively you can use the form below to send us an email. For details on how to find us please visit the Contact Us page.

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