Global Bonds remain a popular discussion point among investors and pose a particular problem because of the lack of homogeneity in the sector. The risks of making a wrong call in a portfolio’s bond allocation are amplified by the on-going abnormal interest-rate environment. The Lipper fund flows data in February 2014, shows that fund buyers are seeking a more dynamic solution through flexible bond funds with broader income-based mandates at the expense of U.S. dollar-, Asian-, and emerging market-specific exposure.
Thomson Reuters
For the 12 months to February 2014 the Lipper Global–Bond Global sector returned minus 8.11%, with the best performing fund (Invesco Perpetual Global Financial Cap) returning 14.5% and the worst performing fund (Axis Renta Fija Cobertura A) returning minus 30.5%. The most popular fund for European fund buyers for February was M&G Optimal Income, which appeared three times in the ten most popular funds (175 buyers combined).
The sector was reasonably concentrated: 24% of the total €5bn that flowed into the sector for February was in the ten most popular options (by purchaser). The 25 most popular options by purchaser represented 37% of the total net inflows for the month.
Table 1 – Global Bond Funds by Buyer Popularity – February 2014.
Source: Lipper, a Thomson Reuters Company.
Looking at popularity by total net assets, M&G featured predominately again. For February M&G Global Macro Bond A Inc, with a total of €431m, topped the charts. This constituted 9% of the total net inflows for the month. M&G Optimal Income, with 215 individual buyers, appeared in three different share classes, and M&G options overall represented 30% of the total net inflows to the sector for February. PIMCO GIS Diversified Income, HSBC ISF MultiAlpha Global Aggregate Bond, Liontrust GF Glo Strat Bond, and Jupiter JGF Dynamic Bond all got honourable mentions.
In what appeared to be one of the best-kept secrets of the sector, Aviva Investors Alpha Yield was used by only four European fund-of-fund buyers. That was despite its having the second best performance in the entire Bond Global sector for the 12 months to February (+13.31%).
A version of this article first appeared in CityWire Global magazine.
