The search for yield has been an increasingly difficult challenge as of late, with negative yields, negative rates and diverging policy paths complicating the global bond market landscape.
Since Switzerland imposed the first negative rate in 2014, the trend spread to Japan and other European nations. On the other side of the pond, the US is struggling to normalize its own rates.
Over the past two years to the end of June 2016, the most commonly held index, the Citi WGBI TR USD, rose just 1.2%, while the average manager in the global bonds sector lost 7.4%
Despite the lower yields, a number of managers have improved their performance significantly over the last few months. Comparing where they sat in the Citywire sector rankings between June 2014 to June 2015 and following the 12-month period of June 2015 to June 2016, we list the three most improved global bond managers.
For this we have compared their returns over these two 12 month periods. The trio listed below have improved their records but have not beat the global bond index Citi WGBI TR EUR which produced negative returns of -9.02% between June 2014 to June 2015 and returns of 11.26% from June 2015 to June 2016.
3. Luigi Fallanca – Eurizon Capital
Ranking rise over 2 years: +248
Performance June 2014-June 2015: -8.74%
Performance June 2015-June 2016: +10.04%
Coming in third in our most improved analysis is Eurizon Capital’s Luigi Fallanca who has been running the Luxembourg-domiciled, $258 million Eurizon EasyFund Bond International fund since September 2010. He also runs a number of other fixed income strategies for the firm.
The global bond’s top regional investments are in the US, Japan and Italy. It is also has an overweight in corporate debt. Fallanca’s top holding is a two-year treasury, which makes up 2.7% of the fund.
2. Jakob Fink - Deutsche AM
Ranking rise over 2 years: +266
Performance June 2014-June 2015: -9.15%
Performance June 2015-June 2016: +11.98%
In second place is Jakob Fink, manager of Deutsche Asset Management’s German-domiciled bond fund since 2009.
The fund is designed for ‘growth-orientated’ investors and currently has $277 million in assets under management.
Over 60% of the fund is invested in government bonds followed by corporates with 12.6%, according to the fund’s latest fact sheet. Emerging market government bonds make up about 7.6% of the holdings.
As of June 30, the fund’s largest individual bond holding, 6.6% is a 13-year US treasury. The largest corporate bond in Fink’s holdings is National Australia Bank at 3.6%. More than a third of the fund is AAA-rated and 40% invested in the US dollar.
1. Brendan Needham - Anima
Ranking rise over 2 years: +267
Performance June 2014-June 2015: -9.37%
Performance June 2015-June 2016: +10.64%
The manager with the biggest improvement in performance is Anima’s Brendan Needham, who is head of fixed income and fund of funds at the Italian group. Needham took over management of the Dublin-domiciled Anima Global Bond Prestige fund in June 2013.
The fund is relatively evenly split between US, Asian and European exposure. However, US bonds as a whole make up 34.4% of exposure, which is ahead of Japan, which makes up 27.3%.
About half of the exposure of the fund is in AA-rated debt. Needham has also focused on mid-range maturities, with three-to-seven-year debt accounting for 36% of the fund. This is while having 25.3% invested in bonds which mature in 10 years’ time or beyond.