HEAD-TO-HEAD: Jupiter versus Pimco

123456

Isaac Poole, Oreana Financial Services

Introduction

Low interest rates and G3 government bond yields have been an almost constant feature of the investment landscape for the past decade. The bellwether 10-year US Treasury note paid  (in retrospect) a dizzying 3.4% yield back in August 2009, but has resolutely remained below 3% since July 2011 – except during last autumn’s ill-fated experiment in US Federal Reserve hawkishness.

It has inevitably been difficult for conservatively-managed bond funds to generate exciting returns in this environment. Easy credit has fuelled equity markets and boosted high yield bond issuance by non-investment grade borrowers. Funds allocated to riskier assets have appealed more to investors than those with mandates to buy steady, but dull, developed market government bonds.

However, the prospect, finally, of an end to the long economic cycle as well as escalating US-China trade and other geopolitical tensions are reasons for investors to become more cautious this year.

The safe haven status of funds invested predominantly in developed market – and especially US – bonds might gain greater appeal. However, with the yield on the US Treasury note at 1.86%, it is hard to see that they can generate much upside.

Nevertheless, FSA asked Isaac Poole, chief investment officer at Oreana Financial Services to compare two large global bond products run by highly-rated managers with rather different styles: the Jupiter Dynamic Bond Fund and the Pimco GIS Total Return Bond Fund.

123456