HEAD-TO-HEAD: Bluebay vs Legg Mason

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The Western Asset Macro Opportunities Bond Fund and the Bluebay Investment Grade Absolute Return Bond Fund versus the Bloomberg Barclays Global Aggregate Index. Note: The funds do not have benchmark indices and the index in the graph is for reference only. Source: FE Analytics

Performance

Both funds had differing periods of ups and downs, according to Dash.

For the Bluebay fund, he said that its performance in 2015 was down because of its short duration position as well as emerging market exposure. In 2016, the fund’s performance turned around due to timely bets on duration around Brexit and the US presidential election.

These bets continued to be contributors in 2017, along with investments in subordinated financials and peripheral sovereign debt, Dash said.

For the Western Asset fund, Dash said it performed well in 2017 due to exposure to emerging markets as well as currency plays.

However, that same exposure has detracted from performance this year.

“Emerging market foreign exchange was one of the more painful trades that the fund had this year,” he said, adding that it has long positions in the Brazilian real and the Argentinian peso.

Dash said that for both funds, it is difficult to predict how they should perform in a particular investment environment.

“For both funds, in terms of exposure in markets, duration and credit spreads, they are quite flexible and their portfolios change quite quickly.”

He advises investors to look for certain biases in the portfolios to get an idea how the funds could behave. For example, the Bluebay fund has a bias toward corporate over government bonds, as well as a preference within the financial sector.

The Western Asset fund tends to have more currency or emerging market plays.

“If any of these areas do well, then the funds should do well. If any of these areas get hurt, then the fund will obviously have a drawdown.”

In terms of volatility, the Western Asset fund’s volatility is higher than Bluebay’s, given that its target volatility is higher, Dash said.

Three-year annualised volatility (%)

Source: FE Analytics

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