The FSA Spy market buzz – 24 March 2023
Bitcoin rolling futures, new fund pricing models gather pace, greenbleaching, sustainable bonds (not), thematic investing at the top; consultant jokes, Munger’s wisdom and much more.
A number of asset managers have recently promoted high yield products in order to cater for perceived investor demand for income in an environment of low-negative government bond yields.
Janus Henderson, for example, launched in Singapore a high yield fund focusing on the US earlier this month.
“With low global rates, attractive relative yields in the high yield asset class and defaults forecasted to decline over the next 12 months, we believe there is opportunity for active managers with expertise in security selection and risk management to add value in today’s high yield market,” Seth Meyer, co-manager of the fund, said previously.
UBS Asset Management, meanwhile, rolled out three high yield funds in Hong Kong in September. Although the firm was keen to promote all three funds (Asian High Yield, Multi Income and US Dollar), it highlighted the Asian High Yield product.
“Asia’s bond markets have grown in size and importance over recent years with the Asian credit universe passing the $1trn mark at the start of 2020. Compared to its global counterparts, Asian fixed income offers higher yield and lower duration risk,“ said Ross Dilkes, portfolio manager of the fund.
Barings has also made moves to promote their high yield solutions to Asian investors. Last month, it appointed Karan Talwar in the newly created role of client portfolio manager for the global high yield investment team. He was previously a senior investment specialist for Asia at BNP Paribas Asset Management.
However, risks continue to loom the asset class, as the economic slowdown caused by Covid-19 continues to affect high-yield corporate issuers, according to a recent report by Moody’s Investors Service.
“The number of downgrades [in Asia] slowed to 10 in the third quarter of 2020 from 22 in Q2,” Annalisa Di Chiara, a senior vice president at Moody’s, said in the report.
“But limited visibility surrounding the resolution and duration of the pandemic is keeping negative bias – i.e. companies with negative outlooks or on review for downgrade – elevated at 37.7%, indicating potential for further downgrade actions.”
Against this backdrop, FSA asked Patrick Ge, Hong Kong-based analyst for manager research at Morningstar, to compare two Asian high yield fixed income products: The Allianz Dynamic Asian High Yield Bond Fund and the Fidelity Asian High Yield Fund.
|Manager/s||Mark Tay, David Tan||Tae-Ho Ryu, Terrence Pang|
|Three-year cumulative return||-3.37%||9.38%|
|Three-year annualised return||-1.34%||2.80%|
|Three-year annualised alpha||-7.78%||0.33%|
|Three-year annualised volatility||10.71||9.72|
|Morningstar analyst rating||Neutral to Negative||Bronze to Neutral|
|Morningstar star rating||**||***|
|FE Crown fund rating||*||**|
Part of Mark Allen.