Head To Head

HEAD-TO-HEAD: Fidelity versus UBS

FSA compares two Asia fixed income products: the Fidelity Asian High Yield Fund and the UBS Asian High Yield Fund.

by Rupert Walker 8 October 20218 October 2021

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Patrick Ge, Morningstar

Introduction

Investors are reassessing their risk expectations about the Chinese property sector and Asian high yield credit in general in the wake of the Evergrande crisis

However, as Wai Mei Leong, a fixed income portfolio manager, points out in a recent paper, the Asian high yield bond market is no stranger to volatility, yet, the market has been able to deliver positive returns to investors over the long term.

Nevertheless, the turmoil which has extended to other highly indebted Chinese property companies, is likely to result in higher bond yields and wider spreads.

In this environment, investors will need to be more discerning while the aggressive “high growth-high leverage” business model pursued by many property developers may gradually become a thing of the past, according to Leong.

Although investors may expect higher default rates in the Asian high yield bond market, she believes that opportunities as the sector’s fundamentals gradually improve.

FSA asked Patrick Ge, analyst at Morningstar, to compare the two largest products in the Asia fixed income category: the Fidelity Asian High Yield Fund and the UBS Asian High Yield Fund.

	Fidelity	UBS
Size	$4.87bn	$3.45bn
Inception	2007	2012
Managers	Tae Ho Ryu, Terrence Pang, Peter Khan	Ross Dilkes, Michael Fleisch, Hayden Briscoe
Three-year cumulative return	6.95%	4.15%
Three-year annualised return	3.37%	3.30%
Three-year annualised alpha	-3.72	-3.38
Three-year annualised volatility	10.04%	9.65%
Three-year information ratio	-0.19	-0.21
Credit rating	BB	BB-
Morningstar star rating	***	****
Morningstar analyst rating	Neutral	Neutral
FE Crown fund rating	**	***
OCF (retail share class)	1.39%	1.46%

Source: FE Fundinfo, Morningstar. (Data in US dollars, 8 Oct 2021)

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