Will they, won’t they? This is the question most investors have been asking themselves throughout 2016 over the possibility of the US Federal Reserve raising rates again.
After raising the interest rate for the first time since the 2008 financial crisis last December, it was expected they would continue to raise rates in 2016. However, the Fed's confidence was hindered by slow growth worldwide, market volatility and political uncertainty.
The central bank is expected to announce a 25 bps hike on Wednesday but US bond managers will continue to face tough challenges whatever the outcome.
In this analysis piece, we've highlighted the top US dollar bond managers with funds available to Ucits investors over the last 12 months.
According to Citywire data, US dollar bonds have attracted around $13.7 billion in assets since the end of November 2015.
Over the past 12 months, 62 of the 135 managers ranked by Citywire have beaten the benchmark, the Bloomberg Barclays Aggregate Bond, which returned 2.01%.
During that time the average US dollar bond manager has narrowly beaten the benchmark with an average return of 2.21%.
Below is a list of the top three ranked managers who have beaten the benchmark and their peers to lead this sector:
3. Anthony Smouha- Atlanticomnium
- Fund: GAM Star Credit Opportunities (USD) USD Acc
- 12-month total return: 6.34%
Citywire AA-rated Anthony Smouha, chief executive of Geneva-based Atlanticomnium, is a manager and advisor on multiple GAM bond funds.
His $1.5 billion GAM Star Credit Opportunities fund is global bond fund that invests in US dollar denominated debt. It has seen success since launching in July 2011 and Smouha is hoping this will continue with his expertise in floating-rate debt underpinning his performance in the current low-yield, volatile environment.
He has most recently added to his financial holdings and participated in a US dollar issue of a non-life UK insurer called Beazley.
Looking ahead in his end of October commentary, he said: ‘The context for the fund is that we expect some further increases in both short and long-term interest rates, which will, however, be limited by slow global growth.
‘As such, our blend of high-quality fixed-rate, fixed-to-floating securities and deeply discounted floating rate notes provides an attractive current return as well as the prospect for selective capital gains.’
2. Michael Kennedy- PPM America
- Fund: Eastspring Investments US Strategic Income
- 12- month total return: 6.74%
Next in the lineup is Citywire AA-rated Michael Kennedy from PPM America, the Chicago-based subsidiary of UK insurer Prudential, which also owns Eastspring Investments.
Kennedy has been running the Luxembourg-domiciled US Strategic Income Bond since it was launched in June 2015. The multi-sector bond fund seeks to outperform its benchmark the Barclays Custom 45/45/10 index, over one and three year time horizons.
At the end of September, the fund was nearly 75% invested in corporate debt while half of the portfolio is focused on high yield bonds.
1. Dan Fuss, Matthew Eagan, and Elaine Stokes – Loomis Sayles
- Funds: the Loomis Sayles Multisector Income fund and the Loomis Sayles Strategic Income fund
- 12-month total return: 10.87%
Veteran bond manager and Citywire + rated Dan Fuss along with managers Matthew Eagan and Elaine Stokess take the top spot. The trio have managed the fund since March 2013. They were joined by a fourth addition to the manager team, Brian Kennedy, in June 2016.
As of the end of September, the $14 billion multisector bond fund was 26% invested in high yield. In the fund’s third quarter commentary the team said that their out-of-benchmark exposure to high yield industrials was a leading contributor to absolute and relative performance.
They have also backed risky bonds within their $11.5 billion strategic income fund, allocating 33.5% to high yield credit.
It was also underweight dollar bonds from the United States in both funds, investing 67.8% versus the benchmark’s 87% in the multisector strategy and 71.3% versus 90.8% in the strategic income strategy.