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Ten bond funds that beat the sell-off - and ten that didn't

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  • Alasdair Pal
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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.

 Fund                            Return  Rank  IMA Sector      
 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.

 Fund Return  Rank  IMA Sector 
 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

 

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