HEAD-TO-HEAD: Blackrock vs HSBC

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The BGF Asian Tiger Bond Fund and the HSBC Asian Bond Fund versus the sector in Hong Kong. Note: The benchmark indices for both funds are not available on FE Analytics.

Discreet calendar year performance

Source: FE Analytics

Performance

Although the Blackrock fund has had four years of underperformance versus the HSBC fund, Yew pointed to the full year 2017 when Blackrock returns were the higher of the two.

“In 2017, the local currency bond asset class outperformed US dollar-denominated bonds. Blackrock’s outperformance shows how it opportunistically invests in some of the local currency debt,” he said.

Yew believes that the Blackrock fund’s opportunistic local currency debt and foreign exchange positions have added value over the long-term, but he cautioned that the same strategy may hurt performance when the US dollar rallies.

Turning to the HSBC fund, Yew attributes outperformance to the strength of the US dollar in the recent years. “The fund has more or less outperformed compared to its more active peers who are actually taking more risk than HSBC,” he said.

However, Yew cautioned about drawing conclusions from a comparison between the HSBC fund and category peer products. . The Asia bond funds, he said, usually have sizable exposure to local currency debt, which has been a performance headwind in recent years.

“It’s one of the reasons why over the last three or five year periods you see the HSBC fund outperforming a lot of its peers.”

In terms of volatility, the Blackrock fund is more volatile than the HSBC fund. Yew said that Blackrock’s higher volatility is expected due to the team’s more active approach to risk.

Three-year annualised volatility

Source: FE Analytics

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