Choice of asset class has been crucial in identifying the top performing offshore fixed in-come fund...
Choice of asset class has been crucial in identifying the top performing offshore fixed in-come funds. Emerging market debt funds have led the field, but long-dated UK government bonds have also performed well, according to a recent Standard & Poor's report.
Three offshore fixed income funds received a frAAA in Standard & Poor's High Income report. Barclays Sterling Bond Fund, Henderson Horizon's Sterling Bond Fund and Invesco GT Gilt Fund all received the highest rating of frAAA, demonstrating extremely strong investment management abilities and consistent above average returns relative to funds with similar objectives.
The Invesco GT Gilt Fund moved up from a frAA rating which demonstrates very strong investment management abilities and consistent above average returns relative to funds with similar objectives.
While the Investec GSF - Sterling Bond Fund moved up one rating to frAA to reflect continuing strong performance.
Other offshore fixed income funds featured in the report were the Allied Dunbar International Funds - Gilt and Income Fund, CMI Global Network Fund - UK Bond, Dresdner RCM Gilt Fund, Fidelity Funds Sterling Bond Fund, Lombard Odier Obliflex E Pound Sterling Fund and Mellon Newton Universal Growth Funds - Sterling Bond, which all received frAA ratings.
This year's report has been extended to incorporate dollar-based global emerging debt funds as well as euro and dollar denominated funds that invest in high yield securities, as well as UK gilt and fixed interest funds.
The fixed income markets have benefited in recent months from the slow down in the US and UK growth rates. However, returns have been fairly meagre according to the report. Factors that have led to mediocre performance include short-term rates in the US, the UK and the Eurozone and widening credit spreads of non-government bonds.
Choice of asset class has been crucial according to the report. The best performing market featured in the report has been emerging debt, following a turnaround in the fallout of the 1998 Asian and Russian crises, and long-dated UK government bonds. Funds that have benefited include the Schroder International Selection Fund Emerging Market Debt which received a new frAA rating and the Amex Worldfolio Emerging Debt Fund and MFS Meridian Emerging Market Debt Fund which both received a frA rating.
Latin America and emerging European markets have been the strongest in this market while relatively weak returns have come from Africa, Asia and the Middle East.
Funds benefiting from long-dated gilt exposure include Fleming Select Long Dated Gilt Fund and Invesco GT Gilt Fund.
Funds investing in corporate debt, such as Schroder High Yield Bond fund, have suffered from widening credit spreads.
Standard & Poor's report says the dollar high-yield sector has been relatively weak in the past 12 months because of the US Federal Reserve rate tightening.
However, European high yield securities have performed somewhat better. Europe has had good economic conditions for growth and high-yield securities.
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