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Patrick Ge, Morningstar
With investors panicking over the coronavirus outbreak, markets have been rattled and even fixed income funds have not been spared.
On average, bond funds sold in Hong Kong fell 8.19% this year ending 16 March, according to a Morningstar report. But their performance is still better compared with equity funds, which returned -27.5% during the period.
However, the report noted that not all fixed income funds were negative. For example, US dollar government bond funds were up 2.64% during the period, while Hong Kong dollar bond funds rose 2.23%, according to the report.
In terms of risks, one of the biggest concerns for investors is the expectation that there will be a pick-up in corporate bond defaults, according to a report from Moody’s Investors Services. It warned that poor market liquidity and surging borrowing costs caused by the coronavirus outbreak might lead to a surge in bankruptcies across sectors.
In addition, investors may find it more difficult to find yield in the fixed income markets given that a number of central banks globally have further cut interest rates, Julie Koo, head of Citi’s private bank investment management sales, said recently.
Against this backdrop, FSA asked Patrick Ge, Hong Kong-based analyst for manager research at Morningstar, to compare two global fixed income products: The Capital Group Global High Income Opportunities Fund and the Templeton Global Bond Fund.
|Manager||Robert Neithart, David Daigle||Michael Hasenstab, Calvin Ho|
|Three-year cumulative return*||-1.54%||-4.76%|
|Three-year annualised return**||-1.88%||-1.37%|
|Three-year annualised alpha**||-2.84||-1.29|
|Three-year annualised volatility**||7.9||5.69|
|Morningstar analyst rating||*****||**|
|Morningstar star rating||Bronze||Silver|
|FE Crown fund rating||***||*|
|Distribution||Gross income yield of 6.8% (the fund is an income fund)||Yield to maturity 3.57%|