Global Bond Funds June 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 1.53% (previously 0.53%) and the median return over the last 12 months was 6.53% (previously 3.54%). Bond yields fell heavily in all advanced economies; in the US 10 year bond yield fell 37bps to 1.44%, close to a two-century low while in Germany 10 year bunds were issued at a negative yield for the first time ever. Investors built in an expectation of economic weakness in Europe and Japan lasting for longer and a “shocker” May US non-farm payrolls report added to the view global growth was deteriorating. The lack of a positive yield in Europe is thought to be spreading to the rest of the world as investors seek out positive yields elsewhere.

The AUD strengthened against the major currencies except for the yen, so the gains to be had out of lower yields were offset by exchange losses for funds which were unhedged. Even so, 34 of the 41 funds in the survey produced positive returns for the month while 37 of the funds also produced positive returns over the last 12 months.

BT Institutional Enhanced Global Fixed International took first prize for June with a return of 2.73%, which is double the best return among survey funds in May. BT said the gains were mostly due to duration, which is the term used to discuss time-to-maturity, and BT’s fund was the beneficiary of holding longer-dated bonds and other credit instruments which increased in value as yields fell.

The fund was ranked 5th over the last 12 months, 7th over 3 years and 12th over 5 years. The fund commenced in 1992 and generally does not invest in traditional fixed-interest securities but obtains returns through index swaps, structured finance securities and derivatives.

In terms of 12 month performances, State Street Global had the highest return among the 31 funds in the Yield Report survey. It returned 10.55% over the year to June 2016, just in front of Vanguard’s International Fixed Interest Index Hedged fund. It is totally hedged in terms of exchange rates so it performance over the year was not aided by the weakening in the Australian dollar against most major currencies in the last 12 months. It is an index fund and it seeks to track the performance of the Citigroup World Government Bond ex-Australia Index.

GLOBAL BOND FUNDS1m (%)3m (%)1y (%)3y (%)5y (%)
Advance Int Fix Intr Multi-Blend 41.531.904.234.635.49
Alpha Diversified Income0.491.963.713.98
AMP Capital FD Intl Bond A 31.792.205.995.575.80
AMP Capital International Bond 41.842.336.536.136.36
ANZ OA IP-CFS Global Credit Income EF 17-0.220.810.382.783.57
Bentham W/S Global Income 1-1.511.58-1.554.066.41
Bentham W/S High Yield 21 0.584.121.855.998.50
Bentham Syndicated Loan ASX Class 17 0.113.401.585.286.98
Kapstream WS Absolute Return Income0.211.102.753.784.64
BlackRock Monthly Income C 17 -
BlackRock WS International Bond 7 1.492.408.257.337.53
BT Global Fixed Interest WS 16 2.733.709.637.576.73
BT Institutional Enhanced Gbl Fixed Int 16 2.733.749.857.777.40
CFS Wholesale Global Bond 15 1.912.649.116.676.52
CFS Wholesale Global Corporate Bond41.943.777.677.828.60
DDH Global Fixed Interest Alpha 17 -1.290.42-2.200.601.42
Dimensional Five-Year Diversified F/I1.351.686.085.185.67
Dimensional Global Bond Trust 4
Dimensional Two-Year Diversified F/I0.400.762.862.953.53
Fidelity Global Strategic Bond 4 -0.521.063.85
Franklin Templeton Global Aggregate Bd W 4 1.702.727.838.00
Franklin Templeton Multisector Bond I 11 -0.48-0.27-4.691.584.76
GAM Absolute Return Bond (AU) 12 0.982.471.491.91
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** 2.453.059.727.407.19
Macquarie Global Income Opportunities Fd 17 0.091.541.072.823.89
Mercer Global Credit Fund 2 1.643.137.977.608.31
Mercer Global Sovereign Bond Fund 16 2.273.2010.438.268.23
Nikko AM International Bond 16 2.413.2310.447.797.10
Omega Global Corporate Bond 17 1.362.517.186.306.79
PIMCO EQT Wholesale Global Bond
PIMCO EQT Wholesale Global Credit B 20 1.362.757.646.907.27
SSgA Global Fixed Income 15 2.373.0410.557.827.80
T.Rowe Price Dynamic Global Bond Fund 17 1.101.797.68
Templeton Global Bond Plus W 16 -0.18-1.14-
UBS Global Credit Fund 4 1.963.807.487.167.53
UBS International Bond 4 1.842.979.067.217.07
Vanguard International Crdt Secs Idx Hdg 8 1.693.007.916.867.34
Vanguard International Fxd Intr Idx Hdg 10 2.323.1210.477.777.76
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 June 2016. Returns in AUD after fees.
Underlined funds can be applied for and redeemed via the ASX mFund platform