General Motors Asset Management (GMAM), which has about $148 billion in assets under management, invests in structured credit. Its Promark Alternative High Yield fund has primarily bought CDO equity tranches.
GMAM will not say how much it has invested in structured credit, but the total figure is about $400 million. That could grow. GMAM has set up its Alpha portfolio to invest some of the money raised to fill its pensions gap. The structured credit strategy in Alpha targets an annual return of 250 basis points over Libor with as low volatility as possible.
?Structured credit investments allow us to take exposure to the risk of traditional asset classes in a more efficient way,? says Boris Rjavinski, a portfolio manager for GMAM's fixed-income group. ?Participating in structured transactions allows us to zero in on the risk we are looking to take, that is, the credit risk of underlying assets, and avoid exposure to the interest rate risk embedded in most fixed-income instruments. As an investor in a CDO, we are most concerned with the ability of underlying assets to continue to generate cashflows, and not as much with the volatility of their market price.?