Global fixed interest July performance
The median 1 month performance in the YieldReport survey of global bond funds was +0.476% (previously -0.06%) and the median return over the last 12 months was 1.82% (previously 2.51%). After a tough June, July witnessed a return to kinder bond market conditions for global bond funds as yields in most markets were stable or lower by the end of the month. Even so, fund managers should be pleased with their performances as the Australian dollar was substantially higher against the USD as well as being higher against the yen and sterling. The fact 40 of 44 funds in the YieldReport survey managed to finish the month with a positive return was quite remarkable.
Bond yields started the month on a rising trend until shortly into the second week when yields started to fall away as the spotlight returned to U.S. politics. Janet Yellen added the brakes to rising yields as she reinforced the very gradual nature of the reduction in the Fed’s balance sheet but then yields rose in most markets when Mario Draghi was reported to be a fixture at Jackson Hole amid speculation his speech would signal of the beginning of the end of ECB asset purchases. Soft U.S. June CPI and retail sales figures soon overshadowed all of that. Doubts regarding the Trump administration’s ability to achieve pro-growth legislative action re-emerged but over in Europe, while the ECB kept monetary policy unchanged, there was a faint signal its asset-purchase plan tapering will be considered in the European autumn.
By the end of the month 10 year bond yields were lower in all major markets, except for Germany where they increased by 8bps to 0.54%. The yield on U.S. 10 year bonds remained unchanged at 2.30%, French yields slipped 1bp to 0.81% and in the U.K. yields dropped 3bps to 1.23%. Even Italian yields played ball and fell 6bps to 2.09%.
The best performing global fund for July in the YieldReport survey was the Alpha Enhanced Yield fund. Its return of 0.58% follows a poor result relative to its peers in June and a mediocre performance in May. The second-highest return was produced by BT Enhanced Credit Wholesale fund which returned 0.49%.
Over the twelve months to July 2017, the Bentham Wholesale High Yield fund retained its top spot with a return of 12.67%. The fund has continued its recent trend of lowering its percentage holdings of high yield bonds. It held just under 90% of its total investment portfolio in high yield securities at the end of July and the balance of the portfolio was invested in cash and derivatives.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 0.20 | 0.49 | -0.21 | 2.49 | 3.46 | |
| Alpha Diversified Income | mFund | 0.48 | 0.63 | 1.64 | 2.98 | 2.99 |
| AMP Future Directions International Bond Fund | 0.35 | 0.75 | -0.24 | 3.38 | 4.04 | |
| AMP Capital International Bond | 0.39 | 0.89 | 0.28 | 3.91 | 4.60 | |
| ANZ-CFS Global Credit Income EF | 0.47 | 0.95 | 4.96 | 2.45 | 4.21 | |
| Bentham Professional Global Income | mFund | 0.54 | 1.97 | 11.86 | 4.85 | 8.48 |
| Bentham Wholesale High Yield | mFund | 1.01 | 2.55 | 12.67 | 7.21 | 9.03 |
| Bentham Syndicated Loan ASX Class | mFund | 0.47 | 1.19 | 9.44 | 5.81 | 7.53 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.32 | 0.83 | 3.02 | 3.11 | 4.07 |
| BlackRock Monthly Income | 1.04 | 2.23 | 6.54 | 3.58 | 7.18 | |
| BlackRock Wholesale International Bond | 0.52 | 1.08 | 0.93 | 4.80 | 5.48 | |
| BT Global Fixed Interest Wholesale | 0.26 | 0.40 | -2.41 | 4.49 | 4.38 | |
| BT Institutional Enhanced Global Fixed Interest | 0.27 | 0.44 | -2.22 | 4.67 | 4.56 | |
| CFS Wholesale Global Bond | 0.18 | 0.36 | -1.85 | 3.84 | 4.32 | |
| CFS Wholesale Global Corporate Bond | 0.64 | 1.85 | 2.96 | 5.33 | 6.45 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.46 | 0.69 | 1.23 | 4.06 | 3.89 | |
| Dimensional Global Bond Trust | 0.53 | 0.47 | 0.25 | 5.42 | ||
| Dimensional Two-Year Diversified Fixed Interest | 0.25 | 0.45 | 2.04 | 2.55 | 2.81 | |
| Fidelity Global Strategic Bond | 0.06 | -0.44 | 4.63 | 4.20 | ||
| Franklin Templeton Global Aggregate Bd W | -0.41 | 0.20 | -2.90 | 3.92 | ||
| Franklin Templeton Multisector Bond I | -0.66 | -1.07 | 10.97 | 1.94 | 5.55 | |
| GAM Absolute Return Bond (AU) | 0.40 | 1.97 | 7.99 | 3.32 | 4.03 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.70 | 1.10 | 7.06 | 5.07 | 4.30 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 0.89 | 2.89 | 5.79 | 5.76 | 7.31 |
| Legg Mason Brandywine Global Fixed Income A | 1.11 | 3.27 | 6.37 | 6.18 | 7.41 | |
| Legg Mason Western Asset Global Bond Fund | 0.49 | 2.73 | ||||
| Legg Mason Western Asset Macro Opportunities Bond Fund | 0.90 | 5.72 | ||||
| Macquarie Global Bond | 0.15 | 0.29 | -2.74 | 4.09 | 4.25 | |
| Macquarie Global Income Opportunities Fd | 0.54 | 1.41 | 4.91 | 3.03 | 4.25 | |
| Mercer Global Credit Fund | 0.76 | 1.75 | 2.00 | 5.13 | 5.96 | |
| Mercer Global Sovereign Bond Fund | 0.19 | 0.90 | 0.07 | 5.90 | 5.87 | |
| Nikko AM International Bond | 0.17 | 0.25 | -1.17 | 4.66 | 5.14 | |
| Omega Global Corporate Bond | 0.77 | 1.62 | 1.36 | 4.54 | 4.72 | |
| PIMCO Global Bond Wholesale | mFund | 0.56 | 1.17 | 2.72 | 5.83 | 5.95 |
| PIMCO Global Credi Wholesale | mFund | 0.59 | 1.24 | 2.57 | 5.42 | 5.66 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 0.43 | 0.83 | 1.32 | 4.98 | 5.06 |
| PIMCO Unconstrained Bond Wholesale | mFund | 0.59 | 0.84 | 6.84 | 3.72 | N/A |
| State Street SSgA Global Fixed Income | 0.18 | 0.39 | -1.66 | 3.94 | 4.48 | |
| T.Rowe Price Dynamic Global Bond Fund | -0.02 | -0.13 | 0.26 | 4.49 | ||
| Templeton Global Bond Plus W | -0.61 | -1.30 | 8.28 | 1.07 | 3.49 | |
| UBS Global Credit Fund | 0.84 | 1.86 | 2.90 | 5.36 | 5.90 | |
| UBS International Bond | 0.36 | 0.89 | -0.08 | 4.69 | 4.88 | |
| Vanguard International Credit Securities Index Hdg | 0.51 | 1.32 | 1.63 | 4.96 | 5.23 | |
| Vanguard International Fixed Interest Index Hdg | 0.20 | 0.39 | -1.29 | 4.81 | 4.93 |
*End of July 2017. Returns in AUD after fees.