Monthly Commentary – February 2021 EUR

by | Mar 16, 2021 | Analysis & Performance, EUR

Monthly comment

The end of February was all about rising interest rates and the impact on financial markets. This has not been a significant concern for our fund, as it is positioned to have low sensitivity to interest rates, notably through the exposure to fixed-to-floater and floater securities. Moreover, subordinated debt, especially subordinated debt issued by the financial sector, tends to benefit from a rising rate environment. This is because the profitability of financials increases with interest rates, and therefore this should lead to tighter spreads for our securities. We also believe, that despite the moves we have witnessed, central banks will remain accommodative. Furthermore we have seen slightly more positive news surrounding Covid-19 and the reopening of European countries. At the same time, we are capturing spreads of circa 400 bps within the subordinated debt of financials. Valuations on these securities are still 140 bps wider than pre-Covid-19. Following the release of the bulk of Q4 earnings, financials overall have been resilient and exceeded expectations in this regard. We have seen a gradual path to normalisation, with less provisioning for expected credit losses. Additionally, capital remains a bright spot, with the average common equity tier one (CET1) ratio increasing to 14.2% from 13.4% pre-Covid-19. We believe the financial sector should be able to remain resilient even in a prolonged Covid-19 scenario. Moreover, due to our exposure to fixed-to-floater and floater securities, we believe the fund is well positioned for a period of rising rates. Finally, subordinated debt of financials remains one of the rare areas where valuations are significantly wider than pre-Covid-19.

  • The Valuation date: November 27, 2024
    serieAsOFDateFKFundNameisinPerformanceTRMTDPerformanceTRYTDPerformanceTRSinceInception
    120,241,128GAM Sustainable Climate Bond fundIE000BSJBO140.01400.0600-0.0145
    220,241,128GAM Star Crdt Ops EUR InvIE00B50JD3540.00990.11370.6596
    320,241,128GAM Star Crdt Ops GBP InvIE00B510J1730.00800.09630.9344
    420,241,128GAM Interest Trend IncIE00BYM4P9130.00460.09430.3793

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