The $57 billion Rest super fund has returned to the global absolute return bond space with a $500 million mandate with Payden & Rygel. The strategy is more defensive than its predecessor, run by GAM, which was spectacularly exited more than a year ago.
Payden & Rygel, represented by GSFM in Australia and New Zealand, aims to preserve capital with its ‘Payden Absolute Return Investment’ (PARI) strategy, which the manager says has a low correlation to both equities and bonds, as well as mainstream credit.
Rest was the first manager to pull its GAM strategy, totalling about $1.2 billion, followed by its consultant, JANA doing the same with about $1.8 billion for other Aussie clients. This precipitated the closure of the fund and its winding up.
One of the portfolio managers, Tim Haywood, was suspended pending an inquiry and subsequently threatened to sue GAM. The inquiry did not prove any wrongdoing. The fund’s collapse also led to the resignation of Alex Friedman, the eccentric CEO, in November last year.
Charles Levinge, GSFM head of Institutional business, said the central pillar of the new strategy was income generated from a “highly diversified and rigorously vetted” portfolio of global bonds.
“This stream of income provides the foundation from which the team adds shorter-term tactical views,” he said. “GSFM has an eight-year relationship with Payden & Rygel who manage over $2.8 billion in absolute return and global corporate portfolios on behalf of Australian Institutional and retail clients.”
GAM’s other strategies appear to have been largely unaffected by the drama surrounding its absolute return bond fund. It’s risk-premia strategy run by Lars Jaeger, in particular, has proved increasingly popular with Australian and NZ investors.