Federal Reserve chairman Ben Bernanke may have shied away from announcing a third round of QE but Citywire Global has taken a closer look at the top performers in the 18 months since the US last turned on the printing press.
In November 2010, the Federal Reserve purchased $600 billion worth of US Treasuries in order to help jump start economic recovery and it appears this had a positive impact on the performance of fund managers operating in US fixed income.
Over this 18 month period of analysis, the average manager in the US bond sector returned 5.05%, while the sector's most commonly used benchmark, Citigroup United States WGBI TR, rose 7.12%.
In total, 60% of US bond managers tracked by Citywire outperformed the average manager, while 29% beat the benchmark performance. In addition, 92% of managers ended this 18 month period in positive territory.
So who stood out? Let’s take a closer look at the managers who returned over 10% during this period.
Fund Manager: Steven Lear
Fund: JPM US Bond B Acc USD
Total returns (October 2010-April 2012): 10.91%
Leading the pack is Steven Lear of JP Morgan, who runs the JPM US Bond fund. Lear, who was previously pin-pointed by Citywire as a Rising Star in the US bond space, took over management of the fund in July 2010.
The fund manager previously said his cautious approach to risk has helped foster strong outperformance, with attempts to counter short term risk by looking at long term duration.
Lear’s main bets have been in mortgage-backed securities (MBS), which make up 30% of his total exposure. MBS was the subject of the first round of QE in November 2008, when the US Federal Reserve bought up $600 billion worth of the securities.
Elsewhere in his portfolio Lear has a preference for high yield corporate debt and investment grade corporate debt, which, when combined, comprise over 30% of his portfolio allocation.
Fund Manager: Kevin Egan
Total returns (October 2010-April 2012): 10.20%
A second appearance in US performance analysis for Egan, who was last noted for his strong turnaround in performance following the downgrade of the USA’s credit rating in August 2011.
According to Invesco’s most recent loan market commentary, the decoupling of senior secured bank loans from the European sovereign headlines has been a boon to recent performance.
However, a cautious approach is seeing it move towards single-B rated securities, which have the strong relative yield opportunities.
Total returns (October 2010-April 2012): 10.11%
Another batch of managers who previously came to our attention in the post-downgrade analysis, the Loomis Sayles quartet has posted strong returns over the past 18 months with a strong preference for the corporate bond sector.
Both investment grade and high yield corporate bonds of US or US-listed business make up 60% of the portfolio. This fund also has the ability to invest in some equities through convertible bond exposure and currently holds 12 US equity stocks, which make up 6% of the overall portfolio.
Fuss and Gaffney have run the Dublin-domiciled fund since its launch in 2004, while Eagan and Stokes were named as co-managers in February 2007.
Here is a breakdown of the top 10 performing funds over this 18 months period of analysis:
|Manager||Fund name||Total returns over past 18 months|
|Steven Lear||JPM US Bond B Acc USD||10.91%|
|Dan Fuss/Matthew Eagan/Elaine M. Stokes/Kathleen Gaffney||10.11%|
|Rick Patel||Fidelity Funds – US Dollar Bond A-USD||8.95%|
|Ken Taubes||Pioneer Funds US Dollar Aggregate Bond||8.86%|
|Gibson Smith/Darrell Watters||Janus Flexible Income I USD Inc||2.19%|
|Matthew Marra/Rick Rieder||BGF US Dollar Core Bond Fund X2 USD||8.02%|
|Christof Stegmann||Julius Baer Inst Dollar AAA-AA-CHF A2/Julius Baer Inst Dollar Bond Fund A2||7.98%|
|Brian Brennan||T Rowe US Aggregate Bond Jd USD||7.90%|
|Sylvain de Ruijter||ING (L) Renta Fund Dollar I Cap USD||7.63%|
|Azim Menghji||HSBC GIF US Dollar Bond ZC USD||7.55%|