Why Global Credit?

Fixed interest markets are continually evolving providing new opportunities for improving investors’ risk adjusted returns. One of the most recent evolutions is in the area of global credit.

Our research has shown that including the excess return or alpha from global credit can help Australian fixed interest funds improve their risk-adjusted returns. The results were so compelling that we decided to include global credit within our flagship Australian bond fund, the Wholesale Australian Bond fund in 2004, and renamed it the Core Plus Strategies Fund.

For Australian investors, the attractions of the global credit market are understandable. Adding global credit to an existing Australian bond fund not only potentially increases the opportunity to earn excess returns but it can also improve a fund’s liquidity and diversification characteristics. The small size of the Australian credit market means that liquidity and diversification are not as great as they are in global markets. By allowing up to 30% of its assets to be invested in global corporate bonds, including those in the US high yield market, we believe the Core Plus Strategies Fund will provide an additional source of returns to investors.

Why Goldman Sachs?

AMP Capital employs a Lead Manager model, when partnering with investment firms to deliver value-add products to our investors. The Lead Manager model seeks to build strategic alliances in areas of investment management where AMP Capital does not have a comparative advantage. Consequently we seek out investment capabilities that complement our expertise while taking the lead in portfolio construction and implementation.

After a thorough search of global fixed interest managers, we selected Goldman Sachs Asset Management (GSAM) to be our global credit manager. GSAM was favoured over other candidates for five key reasons:

1. Product specialisation. GSAM showed an understanding of our investment needs and created a tailored solution that is suited to Australian bond investors.

2. Active management philosophy. This is supported by a strong technical understanding of credit concepts, a focus on alpha strategies and GSAM’s depth of research.

3. An experienced and stable team of professionals.

4. Track record. GSAM has an attractive performance record with particular success in stock selection strategies. We value this more highly than sector and duration strategies.

5. Financial Strength. GSAM has the necessary resources to grow investment teams and build critical IT systems. Its ownership by the Goldman Sachs Group gives it significant financial stability.