As if to make up for the trials and tribulations Australian investors had faced in the latter months of 2019, the first month of 2020 provided Australian investors in global bond funds with exceptionally favourable conditions. US Treasury bond yields plunged all along the curve while sovereign bond yields in other major markets also fell significantly. Additionally, the Aussie dollar was noticeably weaker against all the other major currencies.
Even so, not all funds in the survey finished up for the month. 31 of the 40 funds in the YieldReport survey finished the month with a positive return and 12 of these funds produced a return above 2.0% for the month. Of the 9 funds which produced negative returns, just one of them produced a return of -1.0% or less.
The median 1 month performance in the YieldReport survey of global bond funds in January was +1.69% (December: -0.03%) while the median return over the 12 months including January came to +7.97% (December: +7.25%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned +1.97% in January and +8.59% over the rolling year when calculated in Australian dollars.
In US markets, by the end of the month the 2-year Treasury bond yields had lost 25bps to 1.32%, the 10-year yield had dropped by 42bps to 1.50% and the 30-year yield finished 39bps lower at 2.00%.
In other major bond markets, by the end of the month, German 10-year bund yields were 25bps lower at -0.44%, French 10-year OATS yields had lost 18bps to -0.30%. Italian 10-year government bond yield had plunged 50bps to 0.92% while 10-year UK gilt yields had fallen by 19bps to 0.54%.
The best performing global fund for the month in the YieldReport January survey was the Macquarie Core Plus Australian Fixed Interest fund. It produced an excellent return of 2.46% for the month, following a worst-in-class performance (-1.25%) in December and the top-ranked performance in November.
According to the manager, at the end of January, the fund had borrowed funds equivalent to 51% of its assets in order to gear up its returns. Hence the large swings in performance from month to month.
The second-highest return was produced by the Franklin Templeton Global Aggregate Bond (Wholesale) fund. Its return of +2.43% followed a third-quintile return of -0.27% in December and a near-median performance in November (-0.03%).
In terms of fund performance for the twelve months to the end of January 2020, the above-mentioned Macquarie Core Plus Australian Fixed Interest fund took over from Legg Mason’s Macro Opportunities Bond Fund as the highest performing fund. The Macquarie fund produced a 12-month return of 12.50% while the UBS Global Credit Fund retained second place with a return of 12.06% for the year.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 1.51 | 1.04 | 6.92 | 3.35 | 2.17 | |
| Alpha Diversified Income | mFund | 2.01 | 2.58 | 9.07 | 4.38 | 3.45 |
| AMP Future Directions International Bond Fund | 1.80 | 1.19 | 7.41 | 3.93 | 2.74 | |
| AMP Capital International Bond | 1.84 | 1.33 | 7.94 | 4.46 | 3.27 | |
| ANZ-CFS Global Credit Income EF | -0.10 | 0.63 | 2.65 | 2.08 | 2.46 | |
| Ardea Real Outcome Fund | 0.69 | 0.89 | 8.51 | 5.61 | 4.06 | |
| Bentham Professional Global Income | mFund | 0.08 | 1.48 | 2.75 | 3.74 | 4.43 |
| Bentham Wholesale High Yield | mFund | 0.07 | 2.21 | 9.37 | 5.80 | 6.58 |
| Bentham Syndicated Loan ASX Class | mFund | 0.44 | 2.31 | 4.88 | 4.09 | 5.20 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.62 | 0.87 | 3.78 | 3.10 | 2.90 |
| BlackRock Wholesale International Bond | 1.66 | 1.18 | 8.17 | 4.64 | 3.87 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | 2.34 | 1.15 | 8.71 | 4.42 | 3.10 | |
| CFS Wholesale Global Bond | -0.43 | -0.99 | 6.89 | 2.85 | 2.93 | |
| CFS Wholesale Global Corporate Bond | 2.36 | 2.38 | 11.45 | 5.56 | 4.78 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.37 | 0.36 | 3.03 | 2.50 | 2.67 | |
| Dimensional Global Bond Trust | 2.38 | 1.60 | 10.08 | 5.65 | 4.59 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.14 | 0.28 | 2.17 | 1.87 | 2.07 | |
| Franklin Templeton Global Aggregate Bd W | 2.43 | 2.10 | 10.54 | 5.24 | 3.19 | |
| Franklin Templeton Multisector Bond I | -0.59 | 1.93 | -6.95 | -0.40 | 0.35 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.49 | 2.37 | 5.00 | 3.55 | 4.63 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -0.40 | 0.51 | 5.84 | 4.07 | 2.68 |
| Legg Mason Brandywine Global Fixed Income A | -0.50 | 0.34 | 5.17 | 4.17 | 2.39 | |
| Legg Mason Western Asset Global Bond Fund | 1.72 | 1.69 | 8.98 | 5.49 | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | -0.30 | 2.45 | 10.95 | 7.21 | n/a | |
| Macquarie Global Income Opportunities Fd | 0.78 | 1.33 | 6.53 | 4.10 | 3.52 | |
| Macquarie Core Plus Australian Fxd Intr | 2.46 | 1.87 | 12.50 | 7.01 | 5.12 | |
| Mercer Global Credit Fund | 1.71 | 2.09 | 10.44 | 5.24 | 4.36 | |
| Mercer Global Sovereign Bond Fund | 2.02 | 1.03 | 9.92 | 6.34 | 4.88 | |
| Omega Global Corporate Bond | 2.37 | 1.90 | 9.57 | 4.85 | 4.03 | |
| PIMCO Global Bond Wholesale | mFund | 1.73 | 1.57 | 7.82 | 4.94 | 4.37 |
| PIMCO Global Credi Wholesale | mFund | 1.74 | 2.00 | 8.58 | 4.97 | 4.37 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 2.01 | 1.69 | 8.51 | 5.20 | 4.27 |
| PIMCO Unconstrained Bond Wholesale | mFund | -0.09 | 1.22 | 2.69 | 3.04 | 3.22 |
| State Street SSgA Global Fixed Income | 2.19 | 1.03 | 7.99 | 4.73 | 3.83 | |
| T.Rowe Price Dynamic Global Bond Fund | -1.55 | -0.02 | -1.21 | -0.40 | 2.35 | |
| Templeton Global Bond Plus W | -0.61 | 0.41 | -1.12 | 1.80 | 1.08 | |
| UBS Global Credit Fund | 1.95 | 2.52 | 12.06 | 5.93 | 4.77 | |
| UBS International Bond | 1.91 | 1.52 | 8.09 | 4.81 | 3.94 | |
| Vanguard International Credit Securities Index Hdg | 2.03 | 1.99 | 10.31 | 5.48 | 4.43 | |
| Vanguard International Fixed Interest Index Hdg | 2.07 | 0.94 | 7.40 | 4.59 | 3.80 |
*End of January 2020. Returns in AUD after fees.