Australian Bond Funds January 2016

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Australian Fixed Interest January Performance

Global bond yields fell across all major markets in January as financial and commodity markets (other than government and other investment–grade bond markets) tumbled. Concerns regarding Chinese economic growth were the catalyst and Chinese authorities’ attempts to contain the movements just added fuel to the fire. US 10 year bond yields dropped 35bps, smashed through the 2.00% level towards the end of the month and finished the month at 1.92%. 10 year government bond yields of other major industrialised countries acted in a similar fashion and fell significantly. The UK’s 10 year yield fell 39bps to 1.56%, Germany’s fell 30bps to 0.32% (it halved), France’s fell 35bps to 0.64% while Italian and Japanese yields fell 17bps and 16bps respectively. Australian 10 year bond yields fell 23bps to 2.58%.

What was bad for investors in equity and commodities was good for investors in bonds, although investors in the “high yield” sector fared poorly as sub-investment grade securities were generally shunned.

It was hard for a domestic bond fund not to produce a positive return in January with only one fund in the survey ending the month in the red. BT’s Fixed Interest Wholesale fund had the highest return among the funds in the January survey, producing a 1.63% result, which is a massive turn-around from their December result where the fund finished 30th out of 31. The median result for the month among the funds was 1.14% and the Bloomberg AusBond Composite 0+ Index returned 1.22%, so BT’s result was markedly higher than both.

In terms of 12 month performance, the Jamieson Coote Bonds (JCB) Active Fund looks as if it came up with something different from the pack as it produced a handsome 3.92% return for the period, which compares well with the median 1.97% and the benchmark return of 2.19%. The people at JCB tell us they entered the new year with a conservative stance but they quickly adjusted the fund’s duration at what turned out to be advantageous times amidst all the volatility during the month. This latest result comes on top of the winning performance from the fund for the 12 months to December 2015 but as the fund only began in late 2014 longer results are not available. The JCB fund is an active “long-only” government bond fund which offers a defensive yield with no credit risk and puts it in a good position to take advantage of the recent flight of investors to the safety of government bonds. The small team in charge of the portfolio comprises managers Charlie Jamieson and Angus Coote who have experience servicing central banks while their advisory board includes the talents of Saul Eslake and former Future Fund CEO Mark Burgess.

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Australian Fixed Interest1m (%)3m (%)1y (%)3y (%)5y (%)
Aberdeen Australian Fixed Income1.350.812.465.146.46
Advance Aus Fixed Intr Multi-Blend1.140.330.913.734.80
AMP Capital Corporate Bond-0.13-0.121.684.476.45
Alpha Enhanced Yield0.33-0.19-1.572.183.25
AMP FLI S2-AMP Australian Bond0.890.120.614.366.20
AMP Gen-BlackRock Aust Fixed Int Ind1.110.391.084.055.46
Altius Bond0.540.801.973.73
BT Enhanced Credit WS1.100.682.635.286.92
BT Fixed Interest Retail1.370.400.443.915.47
BT Fixed Interest WS1.630.311.125.206.70
BT Government Bond1.590.701.225.056.64
CFS FC Inv-Aberdeen Aus Fixed Inc1.220.481.303.935.32
CFS FC W Inv-CFS W Australian Bond0.750.542.654.525.53
DDH Fixed Interest0.930.361.594.956.58
Spectrum Strategic Income Fund0.410.472.945.537.06
Jamieson Coote Bonds Active1.320.853.92
Legg Mason Western Asset Australian Bond Trust A1.230.712.335.627.30
Macquarie Australian Fixed Interest1.190.622.325.066.97
Macquarie Core Plus Australian Fxd Intr0.33-0.560.473.956.14
Mercer Australian Sovereign Bond Fund1.430.631.804.946.30
Nikko AM Australian Bond1.210.511.795.156.40
OnePath OA FR IP-Optimix Aus Fixed Int1.140.671.984.85
Perennial Australian Fixed Interest Tr0.840.361.364.516.04
Perennial Fixed Interest Wholesale1.160.822.765.376.92
Perennial Tactical Income Trust1.130.802.655.256.83
Perpetual WFIA-Schroder Fixed Income0.340.582.704.055.18
Perpetual WFIA-Vanguard Aust FI Idx0.42-0.090.063.184.87
PIMCO EQT Australian Bond1.200.320.933.895.28
PIMCO EQT Wholesale Australian Bond0.860.492.084.986.69
PIMCO EQT Wholesale Australian Focus0.410.392.013.624.94
SSgA Australian Fixed Income1.240.672.055.026.49
UBS Australian Bond1.200.602.004.886.36
Vanguard Australian Fixed Interest Index1.310.601.985.036.46
Vanguard Australian Govt Bond Index1.270.601.784.996.48
Bloomberg AusBond Composite 0+Y TR AUD1.220.672.195.246.68

*End of January 2016. Return in AUD after fees
Underlined funds can be applied for and redeemed via the ASX mFund platform

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