Despite the return of volatility in Q1, high yield funds accounted for four of the top five fixed income funds on a three-year cumulative basis to the end of the first quarter, according to FE data.
Geopolitics are making markets jumpy, and managers at Allianz and Jupiter who invest in high yield said that duration has become a key criteria in high yield bond selection.
However, the best performer among fixed income funds authorised for sale in Hong Kong was a country fund, the Aberdeen Global Brazil Bond Fund, FE data shows.
Top fixed income performers
| Fund | 3-year return |
| Aberdeen Global Brazil Bond Fund | 37.74% |
| Value Partners Greater China High Yield Income Fund | 33.12% |
| Aberdeen Global Select Euro High Yield Bond Fund | 30.56% |
| BOCHK All Weather China High Yield Bond Fund | 30.30% |
| Robeco High Yield Bonds Fund | 30.17% |
Data: FE, 1 April 2018, cumulative returns in US dollars. Universe is SFC-registered fixed income funds.
Guillermo Felices, senior market strategist at BNP Paribas Asset Management, said earlier that he saw much opportunity in Brazil. “It is coming out of a recession, we are seeing inflation fall quite rapidly [thanks to] plenty of under-utilised capacity and structural forces driving it down,” he said. “That means that the central bank has had a lot of room to cut rates, and that is very positive for fixed income [holdings].”
The economic turnaround is playing out among political turmoil as the country tackles wide-spread corruption.
Brazil’s president from 2003 to 2011 Luiz Inácio Lula da Silva, known as Lula, has been convicted of corruption and started serving a 12-year prison sentence last week. He intended to run in this year’s presidential elections, scheduled for October, but the imprisonment means that he is now barred from participating.
Lula’s disqualification throws the elections into uncertainty, likely spelling the end of the 13-year period of Workers’ Party at the helm of the country. While the first years brought prosperity, the country experienced a recession in 2015-16.
His successor, Dilma Rousseff, was impeached in 2016 following a corruption scandal.
Ernest Yeung, manager of the T Rowe Price Emerging Markets Value Equity Fund, noted previously that Brazil did very well since the ouster of Rousseff.
The performance of the Aberdeen Global Brazil Bond Fund reflects the 2015-16 recession. While the fund’s three-year return on 1 April was 37.74%, it gained 71.8% from its lowest in September 2015.
Aberdeen Global Brazil Bond Fund vs. category average
