Veteran bonds managers such as M&G’s Richard Woolnough, Capital Group’s Robert Neithart and Pimco’s Michael Gomez have delivered some of the highest annualised returns for their investors after building up lengthy track records on their funds.
In previous articles, we saw that Hargreave Hale’s Giles Hargreave, Fidelity’s Alex Wright and First State’s Martin Lau were some of the equity fund veterans generating the highest annualised returns, while in the multi-asset space names such as City Financial’s David Crawford, Newton’s Robert Shelton and Neptune’s Robin Geffen were at the top of the list.
In this article, we turn to the Investment Association’s bond sectors. To recap we have reviewed the performance of all managers with a track record of 10 years or more on their fund and worked out their compound annualised returns over their time on the portfolio.
Performance of fund vs sector and indices under Neithart
Source: FE Analytics
Topping the table is Robert Neithart as he has overseen a compound annualised return of 9.91 per cent since being appointed to the Capital Group Global High Income Opportunities (LUX) fund in September 2002. This equates to a 188.59 per cent cumulative return over this period, as shown in the above chart.
Capital Group Global High Income Opportunities (LUX) resides in the IA Global Bonds sector. It aims to provide a high level of total return over the long term through a portfolio of emerging market government debt and high yield corporate bonds, helping to explain its strong annualised returns.
Neithart has worked at Capital Group for more than 30 years. The firm was founded in 1931, started its first US high yield mandate in 1986 and launched its first dedicated emerging market debt mandates in 1994.
In second place is Michael Gomez for the 8.51 per cent compound annualised return he has generated since joining the Pimco GIS Emerging Markets Bond fund in October 2003. In cumulative terms, this works out at a 232.94 per cent total return.
Gomez is head of emerging markets portfolio management at Pimco, where he has worked since 2003. Prior to this, he was responsible for market making and proprietary trading of emerging market bonds at Goldman Sachs and spent a year serving as a financial consultant to Colombia’s Ministry of Finance and Public Credit.
In a recent update, the manager commented on the fund’s outperformance over 2018 so far: “In light of the strong positive performance year-to-date, we also remain cognisant of near-term drivers of volatility, namely potential shocks around the Fed’s tightening measures, geopolitical tensions around North Korea and the Middle East, or potential trade policy adjustments.
“More than ever do current market conditions call for an active, issue-by-issue selection process and PIMCO’s rigorous and disciplined bottom-up approach, combined with our top-down macroeconomic approach, has the potential to deliver significant outperformance.”
Source: FE Analytics
In third place is David Hooker for his time on the £312.9m Insight UK Index Linked Bond fund. Since launching the fund in November 2004, he has posted a compound annualised return of 8.40 per cent, which equates to a 201.96 per cent cumulative return
Hooker aims to achieve attractive returns in excess of its FTSE Actuaries UK Gilts Index-Linked Over 5 Years benchmark, seeking to add value through duration, yield curve, country allocation and currency management.
While the vast majority of the portfolio is held in UK index-linked gilts, as would be expected, it does have some small allocations to supranational debt, corporate bonds and an emerging market debt fund.
The higher returns on offer in the high yield and emerging market debt spaces means that the highest-returning managers tend to have a focus on these areas.
This holds true when considering the best veteran manager from the IA Sterling Strategic Bond sector, as Eric Holt has achieved a compound annualised return of 7.98 per cent during his time on the Royal London Sterling Extra Yield Bond fund.
However, Richard Woolnough and Stefan Isaacs also appear on the list after making 7.14 per cent annualised since launching the popular M&G Optimal Income fund in December 2006. This has a more flexible approach and invests across the fixed income spectrum, with an occasional foray into equities.
Performance of fund vs sector under Woolnough and Isaacs
Source: FE Analytics
Other longstanding IA Sterling Strategic Bond managers with annualised returns of more than 5 per cent include George Luckraft on AXA Framlington Managed Income, Alex Ralph and James Foster on Artemis Strategic Bond and John Pattullo on Janus Henderson Strategic Bond.
When it comes to the IA Sterling Corporate Bond sector and Ian Fishwick is at the top with a 7.41 per cent compound annualised return on Fidelity Institutional UK Long Corporate Bond since August 2007.
More corporate bond managers have made strong annualised returns, including Paul Causer on Invesco Perpetual Corporate Bond, Howard Cunningham on Newton Long Corporate Bond and Richard Woolnough on M&G Strategic Corporate Bond.