Global Fixed Income returns 10.3% as managers continue to diversity – Zenith

Over the 12 months to 31 December 2014, the global fixed interest market, as represented by the Barclays Global Aggregate Index ($A Hedged), returned 10.37%While this market return generally acted as a tailwind to the absolute performance of managers, outperformance of respective benchmarks was more variable.

On announcing their latest Global Fixed Income Sector release, Zenith Head of Fixed Income Steven Tang said “The rally in markets, driven mainly by further compression in yields, is in sharp contrast to the continued proliferation of “unconstrained” strategies, which in part have been designed to better navigate a rising rate environment. It has become increasingly important to distinguish between all the Fixed Income strategies that are marketed by fund managers, particularly in the income oriented and unconstrained strategies” Tang said. To deal with this, Zenith has categorised Unconstrained funds into ‘High Income’ and ‘Alternatives– Debt Strategies’ sub-categories.

Tang said that “due to differences in these unconstrained strategies, Zenith reminds investors that they should not expect all these funds to behave in a consistent manner. While Zenith believes that they have strong conceptual merit, a caveat also needs to be applied. Given most of the strategies lack an extensive live performance track record, it’s still too early to say with high conviction that these strategies can produce an investment outcome consistent with the proposed merits.

Zenith created a High Income category in recognition of the growth in funds catering to investors with a “thirst for yield”. Included in these sectors is Emerging Market Debt, a sector which continues to gain allocations and is reviewed in some detail in the report. “Given the generally better fiscal positions of the underlying sovereigns and increasing issuance in these markets, we believe this trend is likely to continue in the future” said Tang.

From an initial universe of 80 global fixed interest funds: 1 was rated “Highly Recommended” rating, 29 “Recommended”, 15 “Approved” and 35 “Not rated”.

CLICK to view full release, including tables highlighting

– Additions to Zenith’s Approved Product List
– Rating changes, and
– Zenith’s full Global Fixed Interest Approved Product List