The first rate hike in nearly a decade has finally hit the markets and US bond managers will be facing volatility in the period ahead.
They have worked with the strengthening US dollar and a strong US economic recovery over 2015, and as they enter a new area of tightening which managers will be able to handle the changes?
From a field of 97 managers running US dollar-denominated funds, with the average manager returning of 0.9%, Citywire Americas has uncovered the top three managers that best rode the period of volatility following the 'Taper Tantrum' of 2013 after former Fed chairman Ben Bernanke's QE tapering announcement.
3. Michael Pfeiffer – KEPLER FONDS
Total returns June 2013 – November 2015: 6.7%
Kicking off our top three ranking is Citywire A-rated Pfeiffer, bond manager at Austrian fund house KEPLER FONDS.
His fund beat its Barclays US Aggregate Bond benchmark over the analysis period which rose 5.7%.
As of end of November, his top holding was KBC IFIMA, a wholly owned subsidiary of KBC Bank. The US makes up his largest country allocation at 17.3%, followed by Holland (10.7%) and the UK (9.2%).
His Ucits fund is domiciled in Austria and invests in US dollar-denominated debt issued by countries and corporations from around the world.
Fund: Plenum CAT Bond Fund
Total returns June 2013- November 2015: 7.5%
In second place are Citywire AA-rated Dirk Schmelzer and David Strasse from Swiss asset management firm Plenum Investments.
The fund invests in catastrophe bonds with a focus on dangerous winds and earthquakes in developed regions such as southeastern US, Western Europe or Japan. In its latest factsheet, the managers explained that weather phenomenon El Nino, which brings warmer temperatures and an increase in precipitation to the US, should not concern catastrophe bond investors since damage has not been seen in capital markets even though they cause large insurance losses each year.
They also expect that as Europe enters its storm season to see gains on corresponding bonds.
1. Anthony Smouha – GAM
Total returns June 2013- November 2015: 18.9%
Topping our ranking of best performing US dollar bonds manager is Citywire AAA-rated Smouha, a regular leading performer in this sector. His $1.2 billion fund focuses predominantly on high yield bonds issued in US dollars with also a 30% allocation to BBB-rated paper.
In his latest commentary, Smouha acknowledged that Fed Chair Janet Yellen’s hints of a rake hike in December gave the fund a boost. He also said financial holdings were looking healthy as companies are strengthen their capital in line with regulatory pressures and new issues are hitting the market with very attractive spreads. The fund participated in new issuances from Swiss Re in November.
He comfortably outperformed its benchmark, the BofA Merrill Lynch US High Yield BB-B Rated, more than tripling its rise of 5.6% over the analysis period.