HEAD-TO-HEAD: Allianz vs Fidelity

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Both the Allianz and Fidelity funds employ a bottom-up approach as well as taking a top-down view to determine the currency, country, credit and sector allocation, according to Ng.

Both funds have low duration of around three years, he said, adding that the duration of the asset class tends to be low in general. Both funds also have the majority of its assets in US dollar-denominated bonds, though they are allowed to invest in local currency, he said.

The main difference between the two funds is their asset allocation. The Allianz fund has high concentrations in country and sector allocations, while the Fidelity fund tends to have a more balanced approach in its weightings.

For example, the Allianz fund has at least 50% of its portfolio invested into Chinese assets. For the Fidelity fund, Chinese assets represent 37% of its portfolio.

Top country allocations

Source: FE

The sector weightings are also different, with the Allianz fund having a large allocation in real estate.

Top sector allocations

Source: FE

Ng noted that the Allianz fund tends to follow market weightings of indices. “It’s a similar concept to an equity fund. If you look at the MSCI World Index, 50%-60% would represent the US and most global equity funds would have the majority of their assets in the US.” For Asia high yield benchmarks, Chinese companies and property dominate these indices, he explained.

The Fidelity fund, on the other hand, is more prudent, limiting the portfolio’s country and sector exposures. In particular, it has a sector allocation limit of 20%, Ng said, although the fund has the flexibility to go over that limit.

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