Rated bond funds: Top nine global investments
12th June 2013 09:33
by Helen Pridham from interactive investor
Share on
The more variety in your investment portfolio the better, and this applies to bonds as much as shares.
Holding bond funds that invest overseas also means you grant investment managers more scope to find value.
Click each fund chart on the right-hand side for an expanded version.
To find out more about the methodology, read:How Money Observer's Rated Funds were chosen.
Winner: Larger fund, Global Bond
M&G Global Macro Bond fund, the larger fund winner in the Global Bond category of Money Observer's 2013 Fund Awards, is managed by the UK's leading bond fund managers. Jim Leaviss, head of retail fixed interest, is responsible for its success. It is a truly "go anywhere" global bond fund, which can invest in government and corporate bonds and other related instruments, including derivatives. Leaviss believes flexibility has been key to its investment success. He says the three main performance drivers over any time period are the active management of the portfolio's duration (bond maturity dates), allocation across all fixed income asset classes, and currency exposures.
This fund appears in one of Money Observer's model income portfolios. It invests in non-investment-grade bonds issued by companies that have to pay higher yields to compensate investors for their lower credit ratings. The lead manager is James Gledhill. The group looks at the overall economic environment and carefully analyses businesses issuing bonds to assess the risks involved. The fund's portfolio is highly diversified and contains 250-300 holdings across a range of sectors, ratings, currencies, issues and regions. The fund offers a good balance between risk and return.
This fund is an Editor's Choice. Baillie Gifford's reputation as a bond fund manager is growing because of the good performance of a number of its fixed-income funds. Money Observer likes the fact the group has a strong emerging markets equity team whose knowledge fund managers Steven Hay and Sally Greig can draw on. The fund mainly invests in local currency government bonds in emerging markets.
This fund is also an Editor's Choice. It will appeal to investors seeking a high immediate income. Money Observer rates this fund because it is managed by two of the UK's most experienced and respected bond fund managers, Paul Causer and Paul Read. They can invest in high-yielding corporate and government bonds - including investment-grade bonds - and incorporate an equity element.
Recently, they have favoured higher credit quality, high-yield bond issuers and higher-yielding investment-grade bonds.
Another Editor's Choice, this fund was the first to popularise the idea of investing in emerging market bonds in the local currency. Fund manager Peter Eerdmans is an expert in this area. He says many emerging economies are in a healthier state than developed markets and that government debt levels are much lower relative to GDP than in the West.
Emerging market bonds offer attractive yields as well as potential for additional returns through a further narrowing of yields relative to developed markets and currency appreciation.
Winner: Smaller fund, Global Bond
This fund was the winner of Money Observer's Best Global Bond Fund award for two years running, in 2012 and 2013. It is a genuine global bond generalist. It can invest in any government or corporate bond and its managers also seek to maintain a good yield.
The lead manager is Geoff Hitchin, who has been running the fund for 25 years. His co-manager is Nicholas Cooling. They aim to hold bonds from a good spread of countries from across the developed world, including the UK, as well as have exposure to emerging economies. They use currency plays to boost returns.
This fund is an Editor's Choice. Money Observer rates the manager of this fund, Stewart Cowley, highly. They believe he is an ideal person to run a bond fund that invests strategically. It can invest in government and corporate bonds, high-yield bonds and currencies. The aim is to deliver good returns in all market conditions through active management and the "short selling" of bonds to profit from falling bond prices.
This fund was a highly commended joint runner-up for Money Observer's global bond fund award in 2012. They regard the fund as a good insurance policy for investors worried inflation may erode their capital. It invests mainly in government and corporate inflation-linked bonds. Manager Jonathan Gibbs says access to inflation-linked bonds globally allows him to position the portfolio in the best-value markets.
This fund was the other highly commended joint runner-up for our global bond fund award last year. It invests in government and corporate bond in emerging markets and has a diverse portfolio of more than 200 holdings. Bonds selection takes into account general economic trends and the outlook for interest rates.