The eurozone has been highly volatile over the past five years with the union’s fortunes whip-sawed by the sovereign debt crisis, political upheaval and concerns over full-blown disintegration.
However, the single currency remains strong and bonds issued in euros even hit a six-year high at the tail-end of 2015, buoyed by companies seeking to capitalise on opportunities created by a strong dollar.
So, which of the 134 dedicated fund managers operating in the Bond – Euro sector have held their heads high over the longer-term. Taking into account managers boasting five-year track records stretching back to July 2012, there are 89 managers active of this timeframe.
Over this timeframe, the average manager returned 22.97% in euro terms, which trails the most-commonly held benchmark, the Citi EMU GBI TR, which rose 26.54% over the same timeframe. But, what if we look at consistency rather than outright outperformance?
Taking each individual 12 month period, which managers, if any, have outperformed the average peer whatever that particular year held? Here we find only two managers – which happen to be co-managers – staying ahead of the pack during these trying times.
Dowding & Matthews, BlueBay AM
Five year total return: 39.43%
Best year of outperformance vs. average manager: +4.69% in 2013/14
The fund, which currently has €1.57 billion in assets, is currently marginally overweight AAA-rated debt (25.8% versus an index weight of 21.8%), while running underweights in BBB and AA. In the latter of these two, it holds almost half of the benchmark position.
In the most recent commentary, Dowding and Matthews said they are seeking disruptive market factors, while expecting the summer carry to continue for a long while. This has led the managers to retain an overweight to sovereign credit risk.
In addition to their consistent returns, the pair boast solid absolute numbers as well. They rank fifth overall for their returns over the five years to the end of July 2017, which also outstrip the benchmark performance over this timeframe.
Their best period of outperformance came in 2013/14 when Dowding and Matthews returned 12.7%. This compared to an 8% return by the average of the 143 fund managers active in the sector over this one-year period, while also sitting comfortably above the 9.5% rise by the index.