Top ranked funds Newcomers
Top high yield bond funds with a track record of under 3 years, but more than 1 year
1-year 1-year 1-year 1-year 1-year Fund Launch Domicile
% chg Alpha Beta R² volatility size (£m) date
Aviva Investors Global High Yield Bond A £ 4.05 0.54 0.63 0.91 0.93 173.8 18 Feb ’09 Luxembourg
Axa US Short Duration High Yld I Gross Acc 3.75 0.38 0.36 0.86 0.58 450.61 30 Apr ’10 UK
Neuberger Berman HY Bd £ Institutional Acc 2.57 0.52 0.85 0.89 1.11 2,578.91 27 Jul ’10 Ireland
St James’s International Corporate Bd Acc 1.24 0.36 0.83 0.89 1.12 488.83 6 Apr ’10 UK
BlueBay High Yield Corporate Bond Dis D £ 0.53 0.29 0.78 0.92 0.99 204.12 2 Feb ’10 Luxembourg
Aberdeen Global Euro High Yield Bond A2 £ -9.42 -0.47 1.45 0.96 1.85 198.83 6 Apr ’09 Luxembourg
Standard Life Sicav Global High Yld AR £ H N/A N/A N/A N/A N/A 198.06 14 Jun ’11 Luxembourg
To 17 Nov ’11. Bid to bid, £, gross income, no cap. Source: Morningstar
FUND PICKER’S COMMENT
LEE ROBERTSON, CEO,
INVESTMENT QUORUM
It is a tough time to come
to the sector but many of
the newcomers are showing
real promise.
The Aviva Global High
Yield Bond Fund, an offshore
fund, has returned
4%-plus over the past 12
months and aims to once
again deliver a total return
through investment in a
diversified portfolio of
fixed interest securities.
The highly experienced
manager, Andrew Lake,
who is formerly of Black-
Rock and F&C, focuses on
identifying both sources of
alpha-embedded risk in
SECTOR OUTLOOK
the high yield market,
structural and rate. Aviva
believes that this means
the corporate bond market
is structurally inefficient
and so provides substantial
opportunities for active
managers to add value on
behalf of investors.
Fixed interest funds
offering investors access to
a higher yield are in the
spotlight as investors weigh
up the risks of non-sovereign
debt with the desire
for income via fixed interest,
and this may encourage
groups to launch more
new funds in the sector.
The fixed interest market
is a currently a real minefield,
on the one hand, we
have the yields of Western
Assessing the outlook for this sector in 2012 presents a real
challenge as so much hinges on the progress made in solving,
or at least containing, the European debt crisis. But the default rate in
the high yield sector has been much less than pricing would suggest,
so investors look poised to continue to collect yields comfortably
ahead of government debt while being able to benefit from rising
prices as well if the outlook for the eurozone does improve. Phil
Milburn of Kames Capital states that he has seen more interest in
high yield in the past year than in the previous nine, so it is clear
investors do believe the risks being taken for yield are worth braving
in a volatile stock market and low interest rate environment.
We remain cautious on this sector as yields have been following
and it has been a very quiet end of year for new bond issuances.
Even of those that were issued some did quite badly and have
disappointed investors. Inflation may also hurt issuers and therefore
investors, as may any increase in default rates.
This risk should not be underestimated as many managers
appear to believe the recent eurozone debt deal that has prompted
a rally in risk assets may not last, as subsequent developments
have reminded investors that financial and political risks remain.
But managers looking out over the medium term are not forecasting
either a deep recession in the global economy or a sharp spike in
corporate defaults. As such, they believe spreads represent decent
value at current levels and that high yield bond funds will continue
to deliver healthy long-term returns.
sovereign bonds plummeting
– and are now at record
lows – while investment
grade and high yield are
experiencing a volatile time
as worries concerning
higher default levels rise.
While the latter is of
some concern, the risks to
defaults are firmly focused
towards the European
credit markets where a
wall of corporate debt is
set to mature in 2012. This
Top 3 performing funds vs indices
% 0
-5
Axa US Short Duration
High Yield I Gross Acc
GIF SB £ High
-100
BofAML £ HY Yield Bond
Nov ’10 Jan ’11 Mar May Jul
To 17 Nov ’11. Source: Morningstar
Top funds – 3-year risk/return
Return (%)
10
5
5
0
-5
Neuberger Berman
HY Bd £ Inst’l Acc
Axa US Short
Duration High
Yield I Gross Acc
BlueBay High Yield
Corp Bond Dis D £
FUND SELECTOR HIGH YIELD BONDS
Aviva Investors Glbl
High Yield Bond A £
FUND ANALYSIS
-10
0.5 05
1
Standard deviation (%)
15 1.5 2
To 17 Nov’11. Source: Morningstar
� Carl Whitbeck, manager of the Axa US Short Duration High Yield
Fund, says it was specifically designed to minimise volatility while
generating steady, incremental income within the US high yield
market. Compared to traditional fixed income strategies, the fund
is supposedly less sensitive to interest rate risk.
uncertainty has led to a
real disbursement of performances
within the IMA
High Yield sector with
some funds heavily weighted
towards European
bonds and the euro.
Neuberger Berman HY Bd £ Inst’l Acc
St James’s International Corp Bd Acc
Sector average
Aviva Inv Global
High Yield Bd A £
Aberdeen Global
Euro High Yld Bd A2 £
JANUARY 2012 [www.portfolio-adviser.com] PORTFOLIO ADVISER
Sep
Nov
29
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