Investors' appetite for European bonds has waned in recent years, with the weight of low – or even negative – yielding debt forcing many into risker areas of the market.
But what of those managers who had been operating in the sector before these difficulties struck? Citywire Selector expands the analysis window to hunt out the best performers of the past five years.
In the Bonds – European sector, there are currently 115 active managers. Fifty six of them have been operating in the market since May 2012 or before.
On average, those with a five-year pedigree returned 20.4% in euro terms to the end of May this year. This performance lags the most commonly used benchmark, the Citi European WGBI TR, which rose 25.29% over the same period.
While a number of managers have posted exceptional absolute performance, what selectors want during periods of instability is certainty. So which fund managers have consistently outperformed the average over the past five years? Let’s take a closer look.
Jean-Paul Cheve, Camgestion
Five year total return (May 2012-May 2017): 43.07%
Best year of outperformance vs. average: +7.45% in 2012/13
The first of three managers to have outperformed in each of the past five years is Camgestion’s Jean-Paul Cheve, who runs the Camgestion Obligations Europe Classic. Cheve, who runs four bond funds at the French group, has overseen the Europe-focused approach since January 2011.
In the €340 million fund, which is domiciled for sale in France, Cheve has 35% exposed to his domestic market, with a further 21.9% invested in Italy. Around 70% is in corporate debt, and Cheve has more than 50% allocated to debt with a 5-10 year maturity.
Reinhold Zeitlhofer, Kepler Fonds
Five year total return (May 2012-May 2017): 41.09%
Best year of outperformance vs. average: +7.09% in 2012/13
Austria-based Reinhold Zeitlhofer has overseen the €319 million fund for more than a decade now, having first taken it on in May 2006. His largest investments are in other bond funds run by Kepler Fonds, such as the Eastern European and high grade corporate bond funds.
Zeitlhofer, who sits just behind Cheve in the five-year absolute return figures, also produced his greatest period of outperformance at the start of this analysis period. In recent developments, Zeitlhofer said he has reduced his duration, while overweighting Scandinavian currencies and underweighting the Swiss franc.
John Beck, Franklin Templeton
Five year total return (May 2012-May 2017): 32.37%
Best year of outperformance vs. average: +5.3% in 2012/13
Rounding out this trio of fund managers is John Beck, who runs the largest fund in this analysis. The Luxembourg-domiciled Franklin European Total Return fund, which Beck co-runs with David Zahn, has €549 million in assets under management. Beck is acknowledged alone, however, because Zahn runs other funds in the sector which impact his performance figures.
At present, the pair have an average credit quality rating of A, with Italy their single biggest geographic exposure at 19.1%. The pair have also used their total return remit to steer well clear of France. Ninety per cent of the fund is in euros, and almost 9% is in Swedish krona-denominated debt.