HEAD-TO-HEAD: Blackrock vs Jupiter

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Three-year performance of the funds and FE’s sector, according to FE data

The Blackrock fund underperformed both the Jupiter fund and FE’s global fixed income sector.

Dash noted that the Blackrock fund is more focused on capital preservation, adding that the lead manager wants to earn a couple of basis points and make small amounts of money from a lot of trades.

“That is how Rieder structures the fund,” he said.

He added that one of the fund’s aims is to generate returns uncorrelated with the broad bond market. From May 2013, when Rieder began as lead manager of the fund, to February 2017, the fund had low correlation to the Barclays Global Aggregate Bond Index.

In terms of performance, the fund beat the index during the same period.

The Blackrock product outperformed its peers when rates dropped and credit sold off. For example, Dash said that during the high-yield sell-off from mid-2014 to early 2016, the fund lost 0.35% compared with an average 1.65% loss for peer funds.

However, because the fund is positioned more defensively than Jupiter, recent returns were restrained by a largely risk-on environment in 2016, Dash noted. Year-to-date the fund is underperforming the aggregate index.

By comparison, the Jupiter fund’s objective is delivering at least second-quartile returns on an annual basis relative to peers. Returns have been impressive as it is able to contain downside risk, and at the same time, keep up with market rallies, Dash said.

The bias toward European high yield and low exposure to the energy sector helped the fund in 2015. In 2015, the risk-mitigating portion of the barbell strategy, expressed via longer-dated Australian and New Zealand government bonds, made gains as prospects for global growth weakened, Dash said.

In addition, in 2016, the main return drivers were high yield debt exposure and active duration management.

However, year-to-date the Jupiter fund is also underperforming the aggregate index.

Dash added he believes both funds should be able to perform well as interest rates rise.

In terms of volatility, the Blackrock fund’s volatility is 1.63, which is lower than Jupiter’s 2.15 and FE’s global fixed income sector average of 3.37, according to FE data.

Dash said that the volatility of both funds is also lower than the Morningstar flexible bond category average. He attributes Blackrock’s lower volatility to its more diversified portfolio.

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