20
Fund selector Global Fixed income
Top ranked funds Three-year performance
top 10 funds by 3-year performance
3-year 3-year 3-year 3-year 3-year 3-year M’star Fund Dom
% chg Alpha Beta R² Sharpe volatility Ratings size (£m)
gartmore Sicav global Bond D2 31.22 0.48 1.4 0.73 0.15 3.04 HHHHH 21.52 lux
Templeton global Bond a M-D $ 29.16 0.48 0.76 0.36 0.15 2.36 HHHHH 5,807.73 lux
WMaM Compass global Bond a 27.18 0.4 1.15 0.77 0.14 2.43 HHHHH 14.81 lux
Sli Sicav global Bond D 25.33 0.39 1.13 0.75 0.14 2.42 HHHH 180.52 lux
Trialpha international Bond 22.73 0.36 1.05 0.87 0.14 2.09 HHHHH 8.39 Jersey
invesco Bond a 21.89 0.26 1.18 0.79 0.08 2.47 HHHH 259.38 ireland
norwich invesco gT Bond 21.36 0.31 1.19 0.83 0.1 2.42 – 0.57 ireland
TR Dollar global Bond acc 20.97 0.4 0.54 0.32 0.14 1.78 HHHH 20.77 ireland
aig global Bond y 20.85 0.26 1.24 0.86 0.09 2.49 HHH 83.15 ireland
BOC-P global Bond Provident 20.26 0.25 1.2 0.87 0.08 2.4 HHHH 336.99 Hng Kng
20 Mar ’06 – 23 Mar ’09. Bid to bid, $, gross income, no cap. Source: Morningstar
The top performing funds
over three years show
decent levels of returns
against both the sector average
and Morningstar Index
used here, with growth
broadly ranging between
20% and 30%, against sector
and index returns hovering
around 7%.
As Peter Toogood,
director of investment services
at OBSR, notes, the
sector is highly heterogeneous,
lending some man-
top 10 funds – risk and return
Return (%)
35
30
top 3-year performers vs index
40
30
20
%
10
0
Norwich
Invesco GT Bond
Gartmore Sicav Global Bond D2
Templeton Global Bond A
Templeton Glbl
Bond A M-D $
Gartmore Sicav Glbl Bond D2
WMAM Compass Global Bond A
25 TriAlpha Int’l Bond
SLI Sicav Glbl Bond D
20
Invesco Bond A
15
BOC-P Global
Bond Provident
AIG Global Bond Y
10
5
TR Dollar Glbl Bond Acc
Sector average
1.5 2 2.5
Standard deviation (%)
3 3.5
20 Mar ’06 – 23 Mar ’09. Bid to bid, $, gross income, no cap
Source: Morningstar
-10
WMAM Compass Global Bond A M’star IM FI Global $
Mar ’06 Sep Mar ’07 Sep Mar ’08 Sep Mar’09
20 Mar ’06 – 23 Mar ’09. Source: Morningstar
agers more latitude than
others in their investment
mandates.
He explains: “This variety
breeds a range of
opportunities: with funds
spanning developed market
sovereign debt, global
aggregate and convertible
bonds, covering both active
currency management and
currency hedged funds, the
sector should be of interest
to a broad spectrum of
investors with very different
risk appetites.
“This point is aptly highlighted
by the wildly divergent
performance of fixed
income assets since the
current crisis engulfed the
credit markets in mid-2007,
which was reflected within
the sector.
“The broad theme for
the subsequent 18 months,
with the exception of a
brief period of respite in
Q2 2008, was risk aversion.
This manifested itself in a
general flight to quality
with all perceived risk
assets eschewed in favour
of the safest assets, namely
government bonds.”
l Top fund
The fund leading the pack,
Gartmore Global Bond,
managed by Andrew
Russell, demonstrates
Toogood’s point, having a
mandate focused on government
bonds. It is interesting
to note, though, that
its largest holdings at the
end of February were debt
issued by European banks,
among them Royal Bank of
Scotland and HBOS, these
being arguably as secure as
corporate debt can be due
to ownership by the UK
government.
The second-placed
fund, Templeton Global
Bond is purely focused on
sovereign debt. According
to a March 2009 S&P fund
report, its manager Michael
Hasenstab generates alpha
through large currency
bets, which he matches
with a short duration bias
to control portfolio risk.
S&P noted the fund is
managed with a total return
approach and along similar
lines to Hasenstab’s Global
Total Return Fund, which
appears in the largest by
assets under management
rankings.
The West LB Mellon
Global Bond Fund is another
government-biased product.
Managers Ernst
Oslander and Thant Han
have been overweight duration
in US and European
markets, while favouring
the dollar over the euro.
Currencies played a
large part in fixed income
returns in the past year,
with Standard & Poor’s
Mashiter explaining the
wider dispersion in returns
among funds in 2008 had a
lot to do with currency
positioning.
“Currencies were very
volatile in 2008. Correct
currency calls would have
offset poor duration calls,
sector rotation or security
selection elsewhere in the
fund. Sterling was weak so
it paid to be underweight
there and overweight the
yen and dollar.”
Mashiter added sterling
unhedged portfolios with
high dollar and yen exposure
had benefited particularly
from the currency
movements.
Fund selector’s choice
Alan Orchard, director, RBC Wealth Management
The performance of the top funds over three years looks exceptionally attractive when
you consider what has happened in the other main asset classes, but one only needs
to look at the sector average of 7.17% to realise that this level of performance is not
true for most funds in the sector.
Any manager that has had any significant weightings in corporate or high yield
debt will have suffered badly, as any value that they may have added at the start
of the period was almost certain to have been stripped away by the turmoil that
we have seen since Lehman Brothers disappeared last year.
Despite good numbers, the Gartmore fund is too small for me at $30m. It seems to be positioned to
avoid any problems until the company’s new head of fixed income arrives from Rensburg. The fund has
only 11 holdings most of which are one-month bank paper and is currently acting more like a cash fund.
WMAM is a more conventional global bond fund and has benefited from a very high government
weighting. This class of the WMAM fund is small and relatively conservative, and has currency positions
of between 25% and 35% in each of the dollar, yen and euro. The large and well-known Templeton fund
is more adventurous, with significant positions in Far Eastern currencies – this would probably be my choice
if I was looking for one fund to cover the world in this sector.
INTERNaTIONaL aDVISER [www.international-adviser.com] May 2009
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