Winner: Hedge Funds Review fund of hedge funds of the decade.

Highly commended: Best performing specialist fund of hedge funds over 10 years.

GAM's fund of hedge funds (FoHFs) team is one of the best resourced and experienced in the industry. With 86 people, based across London and New York in dedicated, complementary areas, the investment professionals are free to focus on identifying the most talented hedge fund managers and combining their funds into strategically weighted portfolios.

GAM’s multi-manager team currently looks after around $9.49 billion of clients’ funds in FoHFs.

Within the investment team, coverage is structured into four broad categories: equity hedge, trading, arbitrage and long only. Each team member is further specialised in individual sub-strategies so they can develop detailed knowledge of the funds and investment dynamics within their respective areas around the world.

GAM Trading II is a FoHF with a 13-year track record, providing investors with access to some of the world's leading trading, global macro and commodity trading adviser (CTA) managers who trade currencies, interest rates, commodities and equity derivatives. It is diversified across 30 to 50 underlying funds, with around 34 current allocations.

On an annual basis, the S&P AAA rated fund has generated positive returns for its investors each year since inception with almost no correlation to equity markets. Net annualised returns are currently 9.25% with volatility of 5.9%.

An example of how the fund is able to generate positive returns out of seemingly negative situations is illustrated by the Russian debt crisis in 1998. At that time the MSCI World index dropped 13.23% while the GAM Trading fund (I) rose 3.08%. In the aftermath of the tech bubble, stock markets plunged 46.92% while the fund rose 39.42%.

More recently, when markets fell by one third as the credit crisis took hold, GAM Trading (II) was in positive territory, up 16.34%.

“We actually found that GAM Trading II performed roughly as we would have expected, both during and after the crisis, largely as a result of the changes we had made in years prior,” the fund's manager, Arvin Soh explains.

“Consequently, we haven't found the need to make any significant adjustments. Instead, recent events have only reiterated to us the importance having a disciplined process to manager selection and risk management, as well as a particular focus on the smaller, newer and more specialised managers,” notes Soh.

Trading funds typically exhibit low correlation with traditional investments such as equities and bonds and tend to perform particularly well during periods of market volatility. GAM Trading II also puts a strong focus on diversification to minimise volatility, helping it generate positive returns in 67% of all months since inception.

“It is fair to say that GAM Trading II is designed to be very balanced and act as a stand-alone product. As such, it is diversified by approaches used, asset classes, geography and time horizon,” comments Arvin.

“It also has a tendency to focus on both newer and more specialized managers, which we believe tend to outperform the industry. In addition GAM Trading II has a focus on rigorous risk management, from both GAM and the underlying managers themselves,” he adds

The fund has assets under management (AUM) of $2.9 billion and offers monthly liquidity with 48 days’ notice and no lock-in. It charges a management fee of 1.6125%, no performance fee and requires a minimum investment of $25,000.

Catherine Cripps, GAM

Fund facts

Full name of fund: GAM Trading II
Investment/management company: GAM
Name of portfolio managers: David Smith and Arvin Soh
Name of investment/management company: GAM
Contact: Matthew Lamb, 12 St James's Place, London SW1A 1NX (+44 (0)20 7493 9990; info@gam.com)
Launch date: April 29, 1997 (II; GAM Trading I launched in 1990)
Portfolio size: $2.9 billion
Annualised return: 9.25%
Annualised volatility: 5.9%
Strategy: trading diversified
Share classes: US dollar
Administrator: GAM Fund Management
Auditor: PricewaterhouseCoopers
Custodian: ABN AMRO Bank
Domicile: British Virgin Islands
Management fee: 1.6125%
Performance fee: none
Minimum investment: $25,000
Lock-in/up: none
Redemption period: monthly with 48 days’ notice