HEAD-TO-HEAD: Blackrock vs Bluebay

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Pictured above: Ashis Dash, Morningstar

In 2018, investors have concerns over tightening liquidity in Europe’s bond market, following an expected reduction in the European Central Bank’s (ECB) asset-buying programme.

The ECB extended its asset purchase programme to corporate bonds in 2016, aiming to meet an inflation target. The rising demand for bonds across the Eurozone lifted their valuations.

However, bonds issued by financial institutions were excluded from the central bank’s purchases, therefore their prices did not experience the lifting effect, noted Ashis Dash, UK-based associate director for fixed income strategies at Morningstar.

“The financial sector is becoming more stable in terms of the balance sheet as European banks gradually improve profitability,” he told FSA. “In the euro corporate bond fund category, it is becoming common for funds to hold an overweight in this attractive sector.”

Overall, as the ECB scales back asset purchases, market liquidity is expected to tighten, resulting in higher yields for new bond issuance and lower prices in the current bond market, he said.

Against this backdrop, FSA looks at two euro corporate bond funds: the Blackrock GF Euro Corporate Bond Fund and the Bluebay Investment Grade Bond Fund. Both funds are Sicav products domiciled in Luxembourg. They are registered for sale to investors in Singapore and available to professional investors in Hong Kong.

Data: Morningstar, FE

Note: Comparison of fees was made on share class D2 for the Blackrock fund and class C for the Bluebay fund.

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