HEAD-TO-HEAD: Axa versus M&G

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Source: FE Fundinfo. Three-year cumulative returns in US dollars.

Performance

“These are two corporate bond funds which do fundamentally different things,” said McDermott.

The Axa Sterling Credit Short Duration Bond Fund aims to deliver a consistent income for investors by generating a higher yield than cash, while limiting the impact of changes in longer-term interest rates.

“It does this by investing in high quality corporate bonds, with expected maturities of less than five years,” said McDermott.

The Axa fund has generated a three-year cumulative return (in US dollars) of 9.60%, which is slightly less than the average return of 10.21% for its designated category (fixed interest – Europe) of funds available to Singapore retail investors, according to FE Fundinfo data.

The M&G Corporate Bond Fund “invests in a full range of government and investment grade bonds, with the ability to invest a certain amount in high yield,” said McDermott.

It has posted a 20.65% three-year cumulative return (in US dollars), compared with an average 18.32% return by its designated sector (fixed income – other currency), according to FE Fundinfo.

The current modified duration is well-over six years on the M&G fund, compared with less than two years for the Axa fund, noted McDermott. The consistently shorter duration of the Axa portfolio means that has been less volatile (10.47% annualised) than the M&G product (13.72% annualised) during the past three years, FE Fundinfo data shows.

“The Axa fund should perform better than its peers when interest rates rise – something we have not seen much of in the past few years, but which may change as inflation concerns grow,” he said.

And of course, locking in attractive yields is “very challenging in the current environment,” McDermott pointed out. The M&G fund has a yield of 1.68%, while the Axa earns only 0.85%.

Discrete calendar year performance

Source: FE Fundinfo. Returns in US dollars. *31 Dec 2020 – 16 Jul 2021

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