GAM's "Hyper Active" series 29 November 2024
Strong GAM #ActiveManagement investment performance: 80% and 87% of Investment Management AuM in funds were ranked 1st or 2nd quartile on a five and ten-year basis respectively, as at 31 October 2024 (Source: Morningstar)
Read our #Hyperactive series to learn more about how GAM's fund teams put the active management advantage to work for our clients:
Passive investment has grown in popularity over recent years, as cost-conscious investors have been willing to track, rather than potentially outperform, market indices.
But in an new age of uncertainty, between geopolitics and rapid technological change - from automation to AI - that touches every industry and will shape how we all live in the future, for investors, the scope to pick the stock winners from the losers could be more rewarding than ever.
I firmly believe in portfolios with focused positions and high active share. Embracing targeted risk in the market is fundamentally necessary. While I occasionally hold underweight positions in the very largest stocks in the market – generally en route to a more constructive position – I maintain a zero weighting in many large caps. In the global equities team we are committed to making bold decisions, fully aware of the substantial influence these stocks wield on our relative risk profile.
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AT1 CoCos (Additional Tier 1 Contingent Convertible bonds) are perpetual bonds with call dates typically every five years. In theory, AT1 investors face potential extension risk, ie the risk of bonds not being called, especially when market conditions deteriorate and the cost of issuing a new AT1 becomes too expensive for banks. AT1s not being called tends to be seen as negative, as investors would require a higher yield to compensate for the longer holding period. In practice, however, European banks have a strong track record of being bondholder-friendly – as 95% of AT1 CoCos have been called at their first call date since the birth of the market.
The rationale behind the sector’s behaviour is that maintaining strong relationships with bondholders should lead to lower funding costs over the long-term. Moreover, banks have significant flexibility to manage upcoming calls, eg issuing new AT1s six or 12 months before the call date to take advantage of market conditions, or even calling without refinancing.
For more expert insights visit our website gam.com/our-thinking.