Since Federal Reserve chair Ben Bernanke first raised the prospect of tapering on 22 May, bond funds have endured a torrid run, but some have coped much better than others.
Fixed income assets sold off throughout the remainder of 2013, while the Fed's decision to finally taper last month caused a further jump in yields, and prompted fears of a difficult 2014 for fixed income managers.
However, while the majority of funds have posted negative returns in the last seven months, not all have lost money.
Some 88 bond funds of the 410 tracked by Morningstar have seen positive returns from 22 May to 9 January, with the top ten made up of seven high yield funds and three strategic bond funds.
The best performing fund is the £285m Old Mutual Bond 1 fund, a strategic bond fund run by TwentyFour Asset Management, which returned 7.09% over the period.
The fund is 88% invested in financials, with 49% rated at BBB, which has done well despite the sell-off.
Below are the ten best performing funds over the period.
|Old Mutual Bond 1||7.09%||1||Strategic Bond|
|Standard Life Higher Income||5.69%||2||High Yield|
|Marlborough High Yield Fixed Interest||5.49%||3||High Yield|
|Aviva Investors High Yield Bond||5.40%||4||High Yield|
|SWIP European High Yield||5.39%||5||High Yield|
|Schroder Monthly High Income||5.36%||6||High Yield|
|Premier Strategic High Income Bond||4.98%||7||Strategic Bond|
|Old Mutual Threadneedle High Yield||4.96%||8||High Yield|
|GLG Strategic Bond||4.94%||9||Strategic Bond|
|IP High Yield||4.81%||10||High Yield|
Unsurprisingly, the worst performing funds nearly all come from the IMA's Global Emerging Market Bond sector, which has been especially impacted by the Fed's decision to taper. Within the sector, local currency funds have been particularly weak as a number of EM currencies slumped against the dollar.
The worst performing fund over the period was the £550m Baillie Gifford Emerging Markets Bond fund which lost 21.84%, according to Morningstar.
Below are the worst performing funds.
|Baring Asian Debt||-16.07||401||Global Bonds|
|Investec EM Blended Debt||-17.32||402||GEM Bonds|
|Old Mutual EM Debt (GBP)||-17.32||403||GEM Bonds|
|Old Mutual EM Debt (SGD)||-17.56||404||GEM Bonds|
|Baring EM Debt Local Currency||-18.12||405||GEM Bonds|
|MFS Meridien EM Debt Local Currency||-19.42||406||GEM Bonds|
|PIMCO GIS EM Local Bond||-19.74||407||GEM Bonds|
|Investec EM Local Currency Debt||-19.78||408||GEM Bonds|
|Threadneedle EM Local||-20.36||409||GEM Bonds|
|Baillie Gifford EM Bonds||-21.84||410||GEM Bonds|
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
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