Global bond fund managers faced tougher conditions than their Australian counterparts in October. Although bond yields fell in most advanced economies, they increased in the US, where a lot of global funds have exposure. A lower Aussie dollar provided some offset. Only 11 out of 40 funds in the YieldReport survey finished the month with positive returns.
The median 1 month performance in the YieldReport survey of global bond funds was -0.30% (previously -0.15%) while the median return over the previous 12 months was -0.24% (September: 0.52%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned -0.27% in October and 0.19% over the previous 12 months when calculated in Australian dollars.
In US markets, 2-year Treasury bond yields increased by 7bps to 2.87%, 10-year yields gained 8bps to 3.14% and 30-year yields jumped by 18bps to 3.39%. In other advanced-economy markets, German 10-year bund yields lost 8bps to 0.39%, French 10-year yields shed 6bps to 0.75% and UK 10-year yields fell by 14bps to 1.30%. Italian 10-year yields jumped by 29bps to 3.42% after the Italian Government engaged in a dispute with Brussels over the Italian 2019 budget.
(For a more-detailed view of the influences on Australian and offshore yields during the month, click here)
The best performing global fund for the month in the YieldReport October survey was the Franklin Templeton Multisector Bond (Institutional) fund. Its return of +2.03% follows on from its best-in-class performance in September (+2.12%). In a repeat of last month’s rankings, the second-highest return of +1.58% was produced by the Templeton Global Bond Plus Wholesale fund.
In terms of fund performance for the twelve months to October 2018, the Bentham Professional Global Income retained its position for a fifth consecutive month as the top-performing fund in the survey. Its 12-month return of 4.53% was the highest in the survey despite an almost 1% fall from the 12-month return it produced in September (5.51%).
The second-highest return of 4.22% was produced by the Invesco Wholesale Senior Secured Income fund. This fund invests into Invesco’s Zodiac fund which in turn invests in senior secured loans. As with the Bentham fund, it is available as an “mfund” on the ASX.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | -0.74 | -1.33 | -1.78 | 0.91 | 2.27 | |
| Alpha Diversified Income | mFund | -0.14 | 0.65 | 1.26 | 2.22 | 2.86 |
| AMP Future Directions International Bond Fund | -0.36 | -0.55 | -0.99 | 1.71 | 3.02 | |
| AMP Capital International Bond | -0.32 | -0.43 | -0.48 | 2.23 | 3.55 | |
| ANZ-CFS Global Credit Income EF | -0.30 | 0.06 | 0.82 | 3.18 | 2.74 | |
| Bentham Professional Global Income | mFund | 0.07 | 1.17 | 4.53 | 6.52 | 5.61 |
| Bentham Wholesale High Yield | mFund | -1.51 | -0.31 | -0.05 | 6.28 | 5.92 |
| Bentham Syndicated Loan ASX Class | mFund | -0.22 | 1.01 | 4.13 | 6.60 | 5.88 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.27 | 0.73 | 2.41 | 2.92 | 3.26 |
| BlackRock Wholesale International Bond | -0.30 | -0.71 | -1.02 | 2.43 | 4.07 | |
| BT Global Fixed Interest Wholesale | -0.11 | -0.91 | -0.56 | 1.33 | 3.60 | |
| BT Institutional Enhanced Global Fixed Interest | -0.09 | -0.87 | -0.42 | 1.50 | 3.78 | |
| CFS Wholesale Global Bond | -0.30 | -0.47 | -1.25 | 1.39 | 3.08 | |
| CFS Wholesale Global Corporate Bond | -1.05 | -0.99 | -2.05 | 3.55 | 4.57 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.23 | 0.44 | 0.54 | 2.36 | 3.16 | |
| Dimensional Global Bond Trust | 0.12 | 0.12 | 0.42 | 3.38 | ||
| Dimensional Two-Year Diversified Fixed Interest | 0.10 | 0.41 | 0.83 | 1.74 | 2.17 | |
| Franklin Templeton Global Aggregate Bd W | -1.79 | -1.84 | -1.04 | 0.25 | ||
| Franklin Templeton Multisector Bond I | 2.03 | -1.30 | -1.21 | 2.88 | 2.29 | |
| Invesco Wholesale Senior Secured Income | mFund | -0.20 | 0.89 | 4.18 | 5.97 | 4.52 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -2.73 | -4.02 | -3.69 | 2.72 | 4.25 |
| Legg Mason Brandywine Global Fixed Income A | -2.47 | -3.57 | -1.46 | 2.76 | 4.47 | |
| Legg Mason Western Asset Global Bond Fund | -1.37 | -1.73 | -2.47 | n/a | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | -2.25 | -5.17 | -7.89 | n/a | n/a | |
| Macquarie Global Income Opportunities Fd | -0.22 | 0.11 | 0.59 | 3.06 | 2.94 | |
| Mercer Global Credit Fund | -0.54 | -0.57 | -1.51 | 3.02 | 4.31 | |
| Mercer Global Sovereign Bond Fund | -1.05 | -1.00 | 1.04 | 3.37 | 5.17 | |
| Nikko AM International Bond | -0.05 | -0.45 | -0.47 | 2.23 | 3.96 | |
| Omega Global Corporate Bond | -0.53 | -0.51 | -1.63 | 2.58 | 3.58 | |
| PIMCO Global Bond Wholesale | mFund | -0.34 | -0.46 | 0.09 | 3.93 | 5.11 |
| PIMCO Global Credi Wholesale | mFund | -0.49 | -0.30 | -0.69 | 3.26 | 4.37 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 0.03 | 0.14 | 1.30 | 3.35 | 4.66 |
| PIMCO Unconstrained Bond Wholesale | mFund | 0.21 | 0.29 | 1.56 | 4.54 | N/A |
| State Street SSgA Global Fixed Income | -0.06 | -0.47 | 0.22 | 2.41 | 3.64 | |
| T.Rowe Price Dynamic Global Bond Fund | 0.39 | 0.01 | 0.41 | 2.45 | ||
| Templeton Global Bond Plus W | 1.58 | -0.44 | 0.37 | 2.46 | 1.89 | |
| UBS Global Credit Fund | -1.01 | -0.80 | -1.81 | 3.56 | 4.42 | |
| UBS International Bond | -0.37 | -0.37 | 0.00 | 2.85 | 4.18 | |
| Vanguard International Credit Securities Index Hdg | -0.57 | -0.44 | -0.81 | 3.14 | 4.22 | |
| Vanguard International Fixed Interest Index Hdg | 0.09 | -0.32 | 0.58 | 2.59 | 4.19 |
*End of October 2018. Returns in AUD after fees.