The FSA Spy market buzz – 24 March 2023
Bitcoin rolling futures, new fund pricing models gather pace, greenbleaching, sustainable bonds (not), thematic investing at the top; consultant jokes, Munger’s wisdom and much more.
Dobrescu said she has “a higher degree of conviction about the Blackrock fund.
“Although the historical performance of the Pimco fund appears stronger, we take a forward-looking view. From that perspective, Blackrock is likely to deliver superior returns and suffer less volatility,” she said.
Moreover, the high fees charged by Pimco is likely to drag on its future performance.
“Empirical evidence shows that fees have the greatest contribution to a fund’s long-term returns. The 20bps premium to the sector average that Pimco charges, compounded over the years, could be very detrimental,” she said.
Morningstar has assigned both funds five-star (historical) ratings, but Blackrock has a gold (forward-looking) analyst rating compared with bronze for Pimco.
“This difference reflects the greater stability and consistency of the Blackrock fund, which inspires more confidence,” she said.
The Pimco strategy might induce more volatility, which in turn could encourage investors to trade in and out of the fund in an unproductive fashion, she added
In contrast, Dobrescu highlighted Blackrock’s robust investment process, which has improved over the years, and the success of its strategy of making uncorrelated relative value trades that makes it an “all-weather fund” that is likely to achieve strong, stable returns in all market conditions.
“The Blackrock fund is not perfect: for instance, it should reduce its fees. But, it is a ‘best-in-class’ proposition,” she concluded.
Part of Mark Allen.