Fund performance
Ng noted that the Blackrock fund’s focus on the US has helped it to achieve an overall stronger performance compared to the AB fund.
“Over the last few years, the main theme dominating bond markets is really about an economic recovery, despite the European debt crisis and a slowdown in China’s growth. Hence, the Blackrock fund’s overweight position in the US is a good strategic decision,” Ng said.
He noted that the AB fund’s allocation into the emerging markets space dented its overall performance.
“Having exposure to the emerging markets high yield sector is possibly the AB fund’s main detractor. The emerging markets space has been badly affected by the slowdown in China’s growth. Also, commodity-driven countries such as Brazil and Russia have performed poorly,” Ng said.
A look at the annual performance figures of both funds:
Commenting on the volatility index for both of the funds, Ng noted that there is a difference of about 1% between the two funds.
He said that the Blackrock fund’s exposure to comparatively lower quality bonds is the main factor contributing to a higher volatility index.
“The difference of over 1% is quite meaningful. It shows that the AB fund’s strategy to hold a balanced portfolio can result in less volatility,” Ng said.
A look at the three-year volatility index for both funds:
Manager review
Ng said that the Blackrock team is co-managed by five managers. Keenan, the head of leveraged finance portfolios and investments, oversees global high yields, leveraged loans and distressed products. He is the decision maker for fund allocations.
The fund’s co-manager, Michael Phelps, specialises in equity long/short portfolio construction and the European and US distressed debt businesses. Mitchell Garfin, also a co-manager on the team, lends support in the areas of macroeconomic and financial analysis.
“The Blackrock fund is known for its strong team-based approach. The fund’s members are senior and as a team, it is a highly experienced one,” Ng said.
