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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Introduction

Luke Ng, senior vice president of research at FE Advisory, argues that an investor’s choice of a global bond fund should largely be predicated on their outlook for the global – and especially the US – economy.

A stronger US economy might herald higher US interest rates, which would have a negative impact on funds with long durations: the prices of bonds with long maturity dates tend to move more for a given interest rate change than the prices of short-dated bonds.

“In this scenario, a defensive fund, with holdings concentrated in (high quality) short maturity bonds is the better option,” he said.

Alternatively, a weak US economy might prompt the Federal Reserve to cut interest rates, which would be a boon for funds invested in long-dated bonds.

FSA asked Ng to compare two US-denominated global funds that both aim to provide high returns, through a combination of income and capital growth, yet have adopted strategies at the opposite ends of the duration spectrum.

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