Global Bond Funds July 2016

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Global fixed interest June performance

The median 1 month performance of funds in the YieldReport survey of global bond funds was 0.95% (previously 1.53%) and the median return over the last 12 months was 6.18% (previously 6.53%). 10 year bond yields inched down in the US but in the UK yields fell heavily (-18bps) as European investors sought sovereign bond yields which were not near zero, such as in France, or below zero as is the case with most, if not all, German bunds.

The AUD strengthened against all the major currencies, so gains made as yields fell were partially offset by exchange rate losses for funds which were unhedged. All the same, only one fund of 42 in the YieldReport survey for the sector had a negative return in July and for the last twelve months, only four were not positive. Globally, bond yields are at, or are close to, record lows and long bond funds are the beneficiaries of such bountiful times.

Bentham Wholesale High Yield fund produced the highest return in YieldReport’s survey of global bond funds in July with a return of 2.53%. The fund invests primarily in US high yield bonds, formerly referred to as “junk bonds” or non-investment grade. These are bonds issued by companies which do not have investment grade credit ratings. Bentham said the fund was the beneficiary of tighter spreads between high yield bonds and comparable risk free benchmark bonds during July.

In terms of 12 month performances, the Dimensional Global Bond Trust’s 9.73% had the highest return among 42 funds in July’s survey. It was followed by State Street’s Global Fixed Income fund which slipped from the best performer’s position in June. Dimensional’s fund was launched in 2011 and it was designed to deliver broad global bond market returns. Their portfolio structure at the end of June is shown below.

Dimensional Global Bond Trust Portfolio

Dimensional Global Bond Trust Portfolio

GLOBAL BOND FUNDS

GLOBAL BOND FUNDS1m (%)3m (%)1y (%)3y (%)5y (%)
Advance Int Fix Intr Multi-Blend 40.562.484.014.725.31
Alpha Diversified Income
AMP Capital FD Intl Bond A 30.802.655.885.505.66
AMP Capital International Bond 40.842.786.416.056.21
ANZ OA IP-CFS Global Credit Income EF 171.141.241.842.763.77
Bentham W/S Global Income 11.671.27-0.334.486.85
Bentham W/S High Yield 21 2.534.114.526.248.75
Bentham Syndicated Loan ASX Class 17 1.582.882.795.477.27
Kapstream WS Absolute Return Income0.401.062.843.694.58
BlackRock Monthly Income C 17 1.492.502.264.276.23
BlackRock WS International Bond 7 0.973.017.887.437.51
BT Global Fixed Interest WS 16 0.314.248.057.546.60
BT Institutional Enhanced Gbl Fixed Int 16 0.294.256.017.006.77
CFS Wholesale Global Bond 15 0.363.057.946.626.47
CFS Wholesale Global Corporate Bond41.623.898.687.838.45
DDH Global Fixed Interest Alpha 17 0.740.38-1.790.571.78
Dimensional Five-Year Diversified F/I0.441.856.055.065.36
Dimensional Global Bond Trust 4 1.234.049.737.80
Dimensional Two-Year Diversified F/I0.110.662.722.873.43
Fidelity Global Strategic Bond 4 1.691.744.47
Franklin Templeton Global Aggregate Bd W 4 0.523.236.327.82
Franklin Templeton Multisector Bond I 11 0.04-0.48-3.861.494.35
GAM Absolute Return Bond (AU) 12 0.931.902.592.020.00
Legg Mason Brandywine Glbl Opp Fix Inc A 15 2.431.223.595.989.89
Legg Mason Brandywine Global Fixed Inc A 15 1.620.131.915.609.03
Legg Mason WA Glb Multi Str Bd A0.323.182.845.376.06
Macquarie Global Bond 13** 0.453.798.507.547.01
Macquarie Global Income Opportunities Fd 17 1.191.792.463.024.00
Mercer Global Credit Fund 2 1.323.308.457.618.15
Mercer Global Sovereign Bond Fund 16 0.694.328.888.338.15
Nikko AM International Bond 16 0.423.709.327.686.96
Omega Global Corporate Bond 17 1.473.127.926.386.72
PIMCO EQT Wholesale Global Bond 91.224.048.197.927.71
PIMCO EQT Wholesale Global Credit B 20 1.153.147.767.087.19
PIMCO EQT Wholesale Diversified Fixed Interest 11.043.737.216.927.08
PIMCO EQT Wholesale Unconstrained Bond B 171.421.681.00
SSgA Global Fixed Income 15 0.453.599.416.974.76
T.Rowe Price Dynamic Global Bond Fund 17 1.312.958.02
Templeton Global Bond Plus W 16 -0.15-0.96-4.461.122.61
UBS Global Credit Fund 4 1.693.828.287.297.46
UBS International Bond 4 0.763.258.547.236.95
Vanguard International Crdt Secs Idx Hdg 8 1.383.588.347.027.21
Vanguard International Fxd Intr Idx Hdg 10 0.213.369.317.657.59
 BENCHMARKS
150% BB AusBond Composite Bond Index /50% BB AusBond Bank Bill Index
260% Barclays Global Aggregate - Corporate Index in $A (Hedged) and 40% Barclays Capital Global Aggregate ex Government ex Treasuries Index ($AUD hedged)
3BarCap Gl Aggregate TR ($AUD hedged)
4Barclays Capital Global Aggregate Bond Index ($AUD Hedged)
5Barclays Capital World Government Inflation-Linked Bond Index ($AUD hedged)
6Barclays Glb Agg Corp ($AUD hedged)
7Barclays Global Aggregate 500 Index ($AUD hedged)
8Barclays Global Aggregate Government-Related and Corporate ($AUD hedged)
9Barclays Global Aggregate Index ($AUD hedged)
10Barclays Global Treasury Index ($AUD hedged)
11Barclays Multiverse Index is the primary benchmark
12Cash Index: AFMA 3-month bank bill swap rate BBSW (Hurdle)
13Citigroup (Customised Benchmark) M1 Global ex-Australia hedged to Australian dollars Index
14Citigroup World Broad Investment Grade ex-Australia Index ($AUD hedged)
15Citigroup World Government Bond Index ex Australia ($AUD hedged)
16JP Morgan Global Government Bond Index ($AUD hedged)
17BB AusBond Australia Bank Bill Index
18Credit Suisse Leverage Loan Index ($AUD hedged)
19Consumer Price Index increases by at least 0.5%
20BB AusBond Composite Bond Index
21Merrill Lynch High Yield Cash Pay Constrained ($AUD hedged)

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