HEAD-TO-HEAD: Axa vs Pimco

123456

Mara Dobrescu, Morningstar

Introduction

In 2018, investors became more nervous about risk due to expected interest rate increases and concern over a slowing global economy. High yield bond funds were hit, recording huge outflows last year, according to Mara Dobrescu, Paris-based manager research director for fixed income strategies at Morningstar.

“Most global high yield funds posted losses last year, particularly in the final quarter, when risk aversion started going up.

“Ultimately, investors are very influenced by short-term performance,” she said.

The same sentiment seems to apply to Asia-based fund selectors. In the last quarter of 2018, there was a clear consensus among fund selectors in the region about the next 12 months: avoid risky assets, which include high yield, and seek safe haven assets, such as cash and developed market government bonds, according to Last Word Research.

From a mixed-asset perspective, other fund managers, such as Pinebridge, have also become more defensive and replaced high yield and some equities with US treasuries.

However, there are fund managers, such as Neuberger Berman and Barings, that believe there are still opportunities in the high yield sector this year.

Against this backdrop, FSA asked Dobrescu to compare two global high yield bond funds: the Axa World Funds Global High Yield Bond Fund and the Pimco GIS Global High Yield Bond Fund.

Dobrescu noted that although both funds have performed consistently well relative to their peers, both have had significant outflows.

Last year, the Axa fund saw net outflows of around $200m, bringing its assets down to $900m, while the AUM of the Pimco fund went down to $3.2bn from $5.4bn.

Source: Morningstar, FE Analytics

* 1 Feb 2016 – 1 Feb 2019

** 6 Feb 2016- 1 Feb 2019

123456