Among the funds for sale in the Hong Kong universe, in US dollar terms, the Aberdeen Global Brazil Bond stood out with a strong return of 42% for the full year of 2016, followed by Pictet’s Latin American Local Currency Debt Fund, according to FE data.
One year: 1 Jan 2016 – 31 Dec 2016
| Best performing funds | Return % | Worst performing funds | Return % |
|
Aberdeen Global Brazil Bond in US |
41.81 | CMS China Opportunities Flexi TR in US | -13.58 |
| Pictet Latin American Local Currency Debt in US | 18.52 | Aberdeen Global Select Global Credit Bond TR in US | -12.00 |
| Franklin High Yield TR in US | 17.70 | Da Cheng China RMB Fixed Income TR in US | -11.74 |
| Eastspring Inv US High Yield Bond in US | 16.24 | Shenyin Wanguo RQFII PRC Government Bond in US | -11.05 |
| Value Partners Greater China High Yield Income TR in US | 15.90 | CSI RMB Income TR in US | -9.83 |
Source: FE Analytics
“Modestly stronger global growth should create improving fundamentals for risk assets like stocks and corporate bonds of all types,” said Natixis Global Asset Management chief market strategist Dave Lafferty, in an earlier report.
However, “these improving fundamentals will only partially translate into higher prices, as valuation has become more of a headwind in these sectors.”
Deutsche Bank Wealth Management global CIO Christian Nolting added that during times of high volatility, investors need to watch out for liquidity issues with high yield products.
China bonds fizzle
The majority of the worst performing bond funds are RMB fixed income funds, partly due to the weakening yuan and worries about rising default risks.
Category-wise, the RMB fixed income funds also have the poorest returns on average compared to the other fixed interest categories, according to FE.
Three years: 1 Jan 2014 – 31 Dec 2016
| Best performing funds | Return % | Worst performing funds | Return % |
| Value Partners Greater China High Yield Income TR in US | 24.26 | PineBridge Global Emerging Markets Local Currency Bond TR in US | -28.36 |
| BEA Union Investment Asian Bond and Currency in US | 22.48 | AXA World Funds Global Inflation Bonds in US | -28.02 |
| Fidelity Asian High Yield in US | 19.26 | BlackRock GF Euro Short Duration Bond in US | -23.58 |
| Eastspring Inv Asian High Yield Bond TR in US | 19.23 | Schroder ISF Global Credit Duration Hedged in US | -23.24 |
| Principal GIF Preferred Securities TR in US | 18.52 | Schroder ISF EURO Short Term Bond in US | -22.99 |
Source: FE Analytics
Asian high yield bond products ranked high in terms of three-year performance, with three funds making it to the top five.
Pheona Tsang, portfolio manager of the BEA Union Investment Asian Bond and Currency Fund, noted that high yield is still preferred. It has lower interest rate sensitivity with a better cushion on credit spread than most other fixed income products.
“Rate risk is definitely a concern. We aim to avoid long–dated credits, shorten the duration and also take profits of some of the distressed bonds invested in 2016,” she told FSA earlier.
Value Partners Greater China High Yield Income Fund, meanwhile, showed top five performance across all fixed income categories over both one-year and three-year periods.
This fund was found to have issued shares exceeding the authorised limit starting November 2012, and the Securities and Futures Commission has fined the fund house HK$4m ($515,700). Subscriptions were temporarily halted last year.
Asia bond funds were well received by Asian investors last year by recording $5.1bn of net inflows, Morningstar data showed.
