Notwithstanding the managers’ skills in credit selection, duration management or yield curve positioning, the fund returns will be significantly affected by the relative movements of the US dollar versus local Asian currencies.
The Blackrock fund remains a predominantly US dollar bond fund. In response to the currency’s weakening in 2017, the fund managers have reduced their US dollar bond holdings to the current 90% from around 98% a year ago. “The move to reduce the US dollar exposure actually helped,” said Ng.
The fund has delivered a lower return (5.38%) than the Legg Mason fund (9.04%), though it has outperformed its index.
The Legg Mason fund, on the other hand, has increased its US dollar exposure this year. “You can say that by doing it they detracted from the fund’s performance,” Ng said. “But relative to the Blackrock fund, Legg Mason still has an advantage with more local currency exposure.”
The Blackrock fund has performed better than the Legg Mason fund both on the three-year basis and the one-year basis as of 30 September.
| Blackrock | Legg Mason | FE Sector average (Asia Pacific Fixed Income) | |
| 3-year return (cumulative) | 10.66% | 5.08% | 6.93% |
| 1-year return | 1.35% | -0.09% | 1.62% |
| 3-year Alpha | 1.47 | -2.27 | |
| 3-year Beta | 0.86 | 1.82 | |
| 3-year Sharpe Ratio | 0.51 | 0.02 | |
| 3-year Volatility | 3.81 | 7.22 | 3.81 |
