More sterling corporate bond and strategic bond strategies climbed up the three-year performance table during the past six months, according to data from FE Analytics, as gilt funds have fallen away.
The average holding period for an open-ended fund, according to the Investment Association, is three years and has become an increasingly important period for investors to measure performance.
Nevertheless, three-year rankings are not set in stone and leadership can change as market conditions shift and strategies just celebrating their third anniversary enter the rankings.
Having previously looked at equity funds, Trustnet has ranked all the bond funds in the IA universe by their three-year returns and compared the current standing with how the rankings looked six months ago.
Given the changing market conditions as the markets have continued rallying in the latter half of 2020, there has been some change in the top-25 bond funds over three years, as the table below shows.
Source: FE Analytics
The best performing bond strategy remained the five FE fundinfo Crown-rated Allianz Strategic Bond fund, managed by Mike Riddell and Kacper Brzezniak.
The £2.7bn strategic bond fund – which invests in different parts of the corporate and government bond market – made a total return of 49.77 per cent over the past three years to end-December, compared with 13.53 per cent for the average IA Sterling Strategic Bond peer and an 11.85 per cent gain for the Bloomberg Barclays Global Aggregate benchmark.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
The second best-performing strategy was the Barings Emerging Markets Sovereign Debt fund, which moved six places higher with a total return of 41.96 per cent. It was the only other fixed income strategy to make more than 40 per cent over three years.
The $949.6m, five Crown-rated fund is managed by Cem Karacadag and Ricardo Adrogué and is an emerging markets hard currency strategy investing in investment-grade and high-yield sovereign debt.
In third place was the €182.5m PIMCO GIS Euro Long Average Duration fund, overseen by Lorenzo Pagani and Michael Surowiecki, with a total return of 34.03 per cent. The fund invests mainly in euro-denominated bonds with duration typically within two years of its 15-year plus benchmark.
Allianz Strategic Bond was joined by three other strategies from the IA Sterling Strategic Bond sector in the top-25 performers: Nomura Global Dynamic Bond, Aegon Strategic Bond and Legg Mason IF Brandywine Global Income Optimiser, with returns of 25.69 per cent, 25.15 per cent and 22 per cent respectively.
The £286m Aegon Strategic Bond fund – managed by Alexander Pelteshki and Colin Finlayson – was the biggest mover in the top-25 climbing more than 100 places.
As well as new strategic bond funds, there were several sterling corporate bond funds moving up the three-year rankings, led by the £383.8m, five Crown-rated Schroder Long Dated Corporate Bond fund managed by Alix Stewart which was up by 31.52 per cent.
Other top-performing sterling corporate bond strategies included BMO Long Dated Sterling Corporate Bond, Schroder Sterling Corporate Bond, and Baillie Gifford Investment Grade Long Dated Bond.
Unlike six months previously, during the latest three-year period there were fewer gilt strategies as government bond yields have continued to fall and demand for safe-haven assets has dropped off amid an improving outlook.
Source: FE Analytics
At the foot of the three-year performance table was the £81.9m Templeton Global Total Return Bond fund, overseen by Michael Hasenstab and Calvin Ho, which has made a loss of 14.23 per cent over the three years to end-2020, compared with a rise of 14.01 per cent for the Bloomberg Barclays Multiverse index and an 11.79 per cent return for the average IA Global Bonds peer.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
It was joined at the bottom by another Templeton strategy, the $5.5bn Templeton Emerging Markets Bond fund – also managed by Michael Hasenstab and co-manager Calvin Ho – which made a loss of 13.43 per cent.