Posted inHead To Head

HEAD-TO-HEAD: Alliance Bernstein vs Fidelity

FSA compares two global fixed income products: the AB Global Bond Portfolio Fund and the Fidelity US Dollar Bond Fund.
by Rupert Walker

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Performance

The AB fund’s primary aim is to generate consistent, stable income with a minimum of credit and interest rate risk, “which it manages to achieve”, Ng said.

However, the Fidelity fund has outperformed the AB every calendar year since at least 2014, and has also earned a better three-year cumulative return. Its 6.70% return since June 2016 is better than the sector average (6.16%), and much more impressive than the AB fund’s negative 1.54% three-year performance.

“The Fidelity fund has a significantly superior total return record. It has done especially well since the start of the year, when the US Fed indicated that interest rates were unlikely to be raised and US treasuries subsequently rallied strongly,” said Ng.

“Its better performance relative to the AB fund is unsurprising during phases of government bond market popularity,” he added.

The Fidelity funds portfolio has an average duration of 6.5 years, much longer than the 1.44 years duration of the AB fund’s portfolio, therefore the prices of its bond holdings will increase more as interest rates fall.

“On the other hand, the Fidelity fund is more vulnerable when interest rates rise and its volatility of 3.17% is much higher than the volatility of the AB fund (0.75%), which is what you’d expect,” said Ng.

Discrete annual performance %

 

Fund / Sector (average)

2018

2017

2016

2015

2014
AB

-0.86

-0.71

-0.71

-1.73

-1.02
Fidelity

0.05

3.34

2.29

0.29

6.81
US dollar fixed income

-1.41

3.40

2.79

-0.88

4.11
 Source: FE Analytics

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