AsianInvestor’s top funds, explained (part 1)
Every year, AsianInvestor's editorial team conduct an intensive analysis of the region's leading asset management service providers, fund products and asset managers, to ascertain the top organisation of the previous year.
The winners of these categories combined a mixture of business performance, growth and progress, measured on both quantitative and qualitative criteria.
Below, we detail why we plumped for the winners of the first half of our asset class awards this year, spanning global and regional fixed income asset classes.
Quantitative data on fund performance over several years was provided by eVestment and Mercer.
GLOBAL FIXED INCOME, HEDGED
Invesco Global Investment Grade Corporate Bond
Invesco’s Invesco Global Investment Grade earns our global fixed income (hedged) award this year for its strong risk-adjusted returns.
According to eVestment, the fund outperformed the Bloomberg Barclays Global Aggregate Corporate Index (Hedged USD) in 2019, and was ranked in the top five by its Sharpe ratio over one, three and five years.
The fund also achieved consistent risk-adjusted returns with high information ratio and low tracking error. In addition, the beta compression across the subordination structure last year benefitted the fund’s overweight to corporate hybrids and subordinated financial bank paper.
As of the end of December the bond fund had $4.9 billion in assets under management (AUM), with a focus on strategic credit themes. It has three additional stages to the investment process, namely thematics, relative value and macro overlays. Some of the key themes include the “Japanification” of Europe and the transitioning and financial deleveraging of the Chinese economy. The vehicle’s holdings had an average credit rating of triple-B plus.
The fund’s managers include Lyndon Man, Luke Greenwood and Michael Booth, who are all based in London.
GLOBAL FIXED INCOME, UNHEDGED
PGIM Fixed Income
PGIM Fixed Income Global Total Return Fixed Income Composite
PGIM Fixed Income’s Global Total Return Fixed Income Composite stood out from its rivals for its performance and Sharpe ratio last year.
According to eVestment, the fund was among the top vehicles that generated attractive risk-adjusted returns with high information ratios over one, three and five years. It outperformed the Bloomberg Barclays Global Aggregate Index by 627 basis points as of the end of 2019.
The vehicle invests across all global fixed income sectors, interest rates, currencies and derivatives, favouring credit-oriented sectors. It employs an actively-managed strategy that integrates global macro views, bottom-up and fundamental research, and quantitative modelling. Investment risk management is also dynamic, as each portfolio has a risk budget that caps its exposure to country, sector, security, quality and currency.
Backed by a 20-strong team, the fund is managed by Robert Tipp, chief investment strategist and head of global bonds; Michael Collies, senior portfolio manager; and Matthew Angelucci, senior portfolio manager. The three average over two decades of investment experience.
EMERGING MARKET DEBT
AXA Investment Managers
AXA WF Global Emerging Markets Bonds I USD
This global emerging markets-focused fund by Axa Investment Managers netted this year’s award for its mixture of strong and consistence performance.
The fund was among the top strategies to produce outstanding performance, according to eVestment. It outperformed the JP Morgan EMBI Global Diversified Index by close to three percentage point last year, and demonstrated stable performance, maintaining low tracking error and high information ratio over three and five years.
The vehicle’s strong returns are supported by a research process that combines in-house and third-party insights, as well as country visits. The firm also makes use of quantitative analysis of individual curves and relative value to generate alpha from stock selection. Being selective and avoiding investing in countries towards which its managers don’t have conviction contributes to part of its success.
Sailesh Lad, head of active emerging markets fixed income, and Mikhail Volodchenko, portfolio manager, are the fund’s lead managers. Lad joined AXA Investment Managers in 2015 while Volodchenko boasts over nine years’ experience covering emerging market debt.
JAPAN FIXED INCOME
Mitsubishi UFJ Trust and Banking Corporation
Ultra Long Term Japanese Government Bond39
A combination of strong and consistent performance helped to lift Mitsubishi UFJ Trust and Banking Corporation’s Ultra Long Term Japanese Government Bond 39fund from its peers in the Japan fixed income category.
According to eVestment, the fund was one of the frontrunners in returns over one, three and five years. More importantly, it posted the highest Sharpe ratio over three and five years. Measuring against the Nomura BPI - Ultra Long Government Index, the vehicle outperformed the benchmark by a considerable margin over one, three and five years.
The strategy focuses on Japanese government bonds with longer durations, which allows the team to increase interest rate sensitivity and higher returns when interest rates decline. This is important, given the Bank of Japan having has set its policy interest rate at -0.1%, and 10-year bond yields sitting at around zero. Aiming to track the Nomura BPI - Ultra Long Government Index, the fund is passively managed.
ASIAN FIXED INCOME, USD
Asian Bond Fund
Fidelity International’s Asian Bond Fund earned our award in the Asian fixed income, US dollar category for its impressive and consistent performance across multiple time periods.
The strategy ranked top three for its returns over one, three and five years. It also ranked top three for its Sharpe ratio over three and five years, according to eVestment. It demonstrated the ability to generate alpha by consistently outperforming its benchmark, BofA ML Asia Dollar Investment Grade Index.
The vehicle focuses primarily in hard currency investment-grade corporate credits in over 10 countries in Asia. It sets out to outperform the Asian investment-grade market through active beta positioning and active security selection. It also has the flexibility to invest opportunistically outside of the designated index within defined constraints. It invests chiefly in China, followed by Indonesia and Republic of Korea.
The vehicle’s lead manager is Eric Wong, who has been managing the fund since October 2013. Morgan Lau and Belinda Liao became co-portfolio managers of the fund and on mandates consistent with the strategy since July last year.
ASIAN FIXED INCOME, LOCAL CURRENCY
Asian Local Bond Fund
Eastspring Investments’ Asian Local Bond Fund was the obvious choice for the Asian fixed income, local currency category, given its ability to offer attractive returns and consistent performance.
According to eVestment, it ranked top five for its returns, over one, three and five years, and top three for its Sharpe ratio over three years. The strategy also outperformed its benchmark, Markit iBoxx ALBI ex-China Onshore ex-China Offshore ex-Taiwan Net of Tax Custom Index (USD unhedged), by a considerable margin.
With a primary focus on local currency bonds issued by Asian government, quasi-government and corporates, the strategy seeks to generate alpha against its custom benchmark over the medium term. It aims to add value through actively managing duration, currency and credit strategies across the investible Asian local bond markets. The vehicletaps local fixed income insights of the firm’s local units located throughout Asia, including Indonesia, Korea, Taiwan, Malaysia, Vietnam and China.
The fund’s lead investment manager is Low Guan-Yi, who has been Eastspring Investments since 2007. She is supported by Goh Rong-Ren and an investment team of 21 professionals.
This article haa been updated to reflect the correct gender of Low Guan-Yi of Eastspring Investments.