Category Archives for "Investment Grade Funds"
The corporate bond market endured its most torrid period since the crisis began. It delivered the worst performance since 2008 in total return terms, with the level of spread weakness not far behind. As measured by the Markit iBoxx index, IG widened by 76bp, high yield by almost 240bp and, for example, the AT1 index by 342bp. No sector was spared, and the weakness accelerated through the final quarter on heightened macro and geopolitical concerns. That is most likely going to continue and be a theme for 2019, but we can expect the weakness to be much more limited as the various events play out.
Full spreads charts/analysis: IG | HY | Senior & Sub Financials | Corporate Hybrids | GBP Corporates | CoCos
As suggested above, credit total returns were the worst since the crisis began. IG lost 1.2% and the high yield market delivered a -3.6% total return. In relative terms, other markets lost more. The Dax delivered -18.2%, the FTSE -12.5% and the S&P recovered late on to -6.2%. There was a positive result, that came courtesy of the Eurozone’s government bond market, where demand for safe-haven risk saw a +0.9% result.
Returns in 2018
Primary market activity was affected by the broad volatility and weakness in most asset classes. The window to get a deal away was open all too infrequently, the hesitation by borrowers and push beckon pricing by investors leaving us with the lowest level of issuance in the IG non-financial sector since 2012, at just €221bn – against an average of €260bn per year in the 2014-2017 period. It will be a good result if we get close to the €220bn level in 2019. US borrowers were prevalent, but the 12% share of the overall market was the lowest since 2012 as well.
Senior financial deal flow was the lowest annual total since the beginning of the euro currency era. Just €130bn was printed versus the previous low of €136bn (in 2017). Given the weakening macro environment and continued high levels of volatility, we’re suggesting issuance declines again in 2019, to around €110bn.
HY Issuance: 2003 – 2019
High yield markets had a good year. In fact, it was the second-best year ever for deals in the HY capital markets, with some €62bn transacted. Most of that was issued in the first nine months of the year though, with wider concerns leaving the window shut for others through the final quarter. Spreads gapped, the index yield is up at 5% (both almost doubling) and we think issuance will decline in 2019 to around the €45bn level.
A particularly poor final quarter saw to it that corporate bond funds recorded a negative performance for the full year, pretty much across the board. Poor secondary market liquidity was a particular feature as well as frustration. That’s the nature of the beast. While we also had to contend with new issues launched with higher premiums than we might be used to, and whole sectors repriced as a result. The IG index lost around 1.2%, but most reasonably sized funds lost in excess of 2%.
In sterling, it was a similar picture, with the index off by just over 2%, but reasonably-sized funds (in excess of £1.5bn AUM) lost 3% or more.
>>See the full IG Euro Performance tables<<
>>See the full HY Euro Performance tables<<
>>See the full Sterling IG & Sterling HY Performance tables<<
Overall, we endured a torrid time of it in 2018. Others did worse, but it’s scant consolation. Given the severity of the equity markets’ volatility, it was always going to have a contagion impact on the corporate bond market. The corporate bond market held up quite well until the final quarter, where it then came under some greater levels of pressure and performance deteriorated more rapidly.
As we head into 2019, we should exercise caution, be wary of buying any dips and not chase any rallies. The macro environment is extremely challenging and geopolitical stresses remain elevated. The picture ought to become clearer over the next few weeks. Good luck.
All figures are to month-end August 2019 Jump to: Top Performing IG € Funds
Performance of the largest IG Euro corporate bond funds ordered by assets under management.
# | Fund / ISIN | Size (€bn) | 3mth/ αlpha | 1yr*/ αlpha | 3yr*/ αlpha | 5yr*/ αlpha | Morningstar Rating |
---|---|---|---|---|---|---|---|
1 | Schroder ISF EURO Corp Bd C Acc EUR LU0113258742 | 9.340 | 18.98 5.79 | 7.71 2.51 | 3.56 1.76 | 4.20 1.98 | ★★★★★ |
2 | Nordea 1 - European Covered Bond BP EUR LU0076315455 | 5.107 | 14.09 0.90 | 6.77 1.56 | 2.64 0.84 | 3.31 1.09 | ★★★★ |
3 | MS INVF Euro Corporate Bond A LU0132601682 | 4.152 | 16.82 3.63 | 6.40 1.20 | 2.49 0.69 | 2.72 0.50 | ★★★★ |
4 | SLI European Corporate Bd D Acc EUR LU0177497814 | 3.113 | 16.54 3.35 | 6.60 1.40 | 2.25 0.45 | 2.92 0.70 | ★★★★ |
5 | BGF Euro Corporate Bond A1 EUR LU0162660350 | 2.979 | 16.19 3.00 | 6.22 1.02 | 2.55 0.75 | 3.06 0.84 | ★★★★ |
6 | Caixabank Master RF Privada Euro FI ES0114706007 | 2.742 | 0.00 0.00 | 0.00 0.00 | 0.00 0.00 | 0.00 0.00 | |
7 | Nordea Corporate Bond I K FI0008801303 | 2.650 | 17.45 4.26 | 7.02 1.82 | 2.55 0.75 | 3.00 0.78 | ★★★★ |
8 | SSGA State Street Euro Corp Bd Idx I Acc LU0438092701 | 2.645 | 16.83 3.64 | 6.62 1.42 | 2.31 0.51 | 2.83 0.61 | ★★★★ |
9 | BlueBay Investment Grade Bd B EUR LU0179826135 | 2.578 | 19.33 6.13 | 6.16 0.96 | 3.03 1.23 | 2.45 0.23 | ★★★ |
10 | Vanguard Euro IG Bd Idx Ins EUR Acc IE00B04FFJ44 | 2.485 | 15.43 2.24 | 6.54 1.33 | 1.99 0.19 | 2.54 0.32 | ★★★ |
11 | BNP Paribas Euro Corporate Bd C C LU0131210360 | 2.398 | 15.61 2.42 | 6.04 0.83 | 1.79 -0.01 | 2.45 0.23 | ★★★ |
12 | Aegon Euro Credits I EUR Acc IE00BZ005B08 | 2.215 | 16.24 3.05 | 6.87 1.67 | 2.73 0.93 | 3.18 0.96 | ★★★★★ |
13 | Amundi Fds Euro Corp Bd I EUR C LU0119099496 | 2.115 | 16.75 3.56 | 6.85 1.65 | 2.70 0.91 | 2.89 0.67 | ★★★★ |
14 | Vontobel EUR Corp Bd Mid Yld A EUR LU0153585566 | 2.059 | 18.68 5.49 | 7.39 2.18 | 2.37 0.58 | 2.92 0.70 | ★★★★ |
15 | Schroder ISF EURO Crdt Convct C Acc EUR LU0995119822 | 1.966 | 19.57 6.38 | 7.78 2.57 | 4.24 2.45 | 4.93 2.71 | ★★★★★ |
16 | Invesco Euro Corporate Bond C EUR Acc LU0243958047 | 1.925 | 19.38 6.19 | 7.23 2.03 | 2.44 0.64 | 2.49 0.27 | ★★★★ |
17 | Kempen (Lux) Euro Credit J LU0630255858 | 1.821 | 16.97 3.77 | 7.58 2.37 | 2.85 1.05 | 3.34 1.12 | ★★★★★ |
18 | iShares Euro Crdt Bd Idx (IE) Instl Acc€ IE0031080645 | 1.739 | 16.05 2.85 | 6.81 1.61 | 2.02 0.22 | 2.53 0.31 | ★★★ |
19 | Janus Henderson Hrzn Euro Corp Bd I2 EUR LU0451950587 | 1.552 | 15.35 2.16 | 6.85 1.65 | 2.78 0.98 | 2.88 0.66 | ★★★★ |
20 | DWS Invest Euro Corporate Bds FC LU0300357802 | 1.522 | 17.75 4.55 | 7.21 2.00 | 2.79 0.99 | 3.08 0.86 | ★★★★★ |
Top performing IG Euro corporate bond funds ranked by rolling 1 year performance.
Rank | Fund / ISIN | Size (€mm) | 3mth/ αlpha | 1yr*/ αlpha | 3yr*/ αlpha | 5yr*/ αlpha | Morningstar Rating |
---|---|---|---|---|---|---|---|
1 | Zurich Corporate Bonds Long LU1466077309 | 41 | 41.50 28.30 | 15.84 10.64 | 0.00 0.00 | 0.00 0.00 | |
2 | LBBW Unternehmensanleihen Euro Offensiv DE000A1144F1 | 79 | 22.78 9.59 | 9.22 4.02 | 4.77 2.98 | 0.00 0.00 | ★★★★★ |
3 | UniInstitutional German Corporate Bds + LU0847345435 | 342 | 25.53 12.33 | 9.09 3.88 | 3.52 1.72 | 4.12 1.90 | ★★★★★ |
4 | Allianz Euro Credit SRI W EUR LU1136108591 | 881 | 21.74 8.55 | 9.07 3.87 | 3.14 1.35 | 3.82 1.60 | ★★★★★ |
5 | Allianz Corps-Corent P EUR DE0005316285 | 229 | 21.25 8.06 | 8.58 3.37 | 3.03 1.23 | 3.98 1.76 | ★★★★★ |
6 | Metzler Euro Corporates AI DE000A0RBZB5 | 229 | 18.14 4.95 | 8.17 2.97 | 2.77 0.98 | 3.26 1.04 | ★★★★ |
7 | BNPP E Mark iBx EUR Lqd Corp Tr I C LU1291094677 | 339 | 16.95 3.76 | 8.07 2.87 | 2.46 0.66 | 2.69 0.47 | ★★★★ |
8 | AAF-Schroder Euro Corporate Bonds C € LU0979879631 | 95 | 19.55 6.36 | 7.95 2.74 | 3.60 1.80 | 4.20 1.99 | ★★★★★ |
9 | M&G European Credit Investment C EUR Acc LU0617482376 | 683 | 17.02 3.82 | 7.94 2.73 | 3.38 1.58 | 3.58 1.36 | ★★★★★ |
10 | Nykredit Invest Engros EuroKredit DK0016044654 | 132 | 17.61 4.42 | 7.90 2.70 | 3.15 1.36 | 3.81 1.59 | ★★★★★ |
11 | Schroder ISF EURO Crdt Convct C Acc EUR LU0995119822 | 1966 | 19.57 6.38 | 7.78 2.57 | 4.24 2.45 | 4.93 2.71 | ★★★★★ |
12 | Deutsche MAG FI EUR IG Corporates EUR I LU1176828389 | 88 | 17.86 4.67 | 7.71 2.51 | 2.60 0.80 | 0.00 0.00 | ★★★★ |
13 | Schroder ISF EURO Corp Bd C Acc EUR LU0113258742 | 9340 | 18.98 5.79 | 7.71 2.51 | 3.56 1.76 | 4.20 1.98 | ★★★★★ |
14 | LGIM Euro Corporate Bond B EUR Acc GB00B6CFP326 | 876 | 17.26 4.07 | 7.65 2.45 | 3.01 1.22 | 3.37 1.15 | ★★★★★ |
15 | Nykredit Invest Engros Eurokredit SRI DK0060709814 | 114 | 17.41 4.22 | 7.63 2.43 | 3.01 1.21 | 0.00 0.00 | ★★★★★ |
16 | Kempen (Lux) Euro Credit J LU0630255858 | 1821 | 16.97 3.77 | 7.58 2.37 | 2.85 1.05 | 3.34 1.12 | ★★★★★ |
17 | Fidelity Euro Corporate Bond Y-Acc-EUR LU0370787359 | 242 | 17.63 4.43 | 7.57 2.37 | 2.43 0.63 | 2.94 0.72 | ★★★★★ |
18 | L&G Euro Corporate Bond Z EUR Inc LU0984223155 | 111 | 17.15 3.96 | 7.49 2.29 | 3.10 1.30 | 3.48 1.26 | ★★★★★ |
19 | Allianz Euro Invmt Grd Bd Strat IT EUR LU0706717278 | 287 | 18.12 4.93 | 7.45 2.25 | 2.36 0.57 | 2.86 0.65 | ★★★★ |
20 | Kempen (Lux) Euro Credit Plus I LU0986645306 | 481 | 16.33 3.14 | 7.45 2.25 | 2.88 1.09 | 3.56 1.34 | ★★★★★ |
European domiciled funds in Morningstar Category EUR Corporate Bond, Oldest share class, All figures EUR (€), Total returns annualised, as at last month end. Alpha is the measure of an investment’s return in excess of the Morningstar Category average. Fund sizes are as reported by the management groups and the latest available to Morningstar. The Morningstar Rating is calculated based on a fund’s total returns, adjusted for risk and sales charges, relative to other funds in its Morningstar Category, based on a weighted average of a fund’s 3-, 5-, and ten-year ratings, depending on the length of its record. Data source: © 2017 Morningstar, Inc. All rights reserved.
The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Important note regarding third party indices: Morningstar does not own any third party index data (S&P, FTSE, MSCI), so cannot authorise its use. The journalists should contact each vendor directly to get authorisation for the data they require.
All figures are to month-end Aug 2019
Jump to: Top Performing IG £ Funds
Performance of the largest IG Sterling corporate bond funds ordered by assets under management.
# | Fund / ISIN | Size (£bn) | 3mth/ αlpha | 1yr*/ αlpha | 3yr*/ αlpha | 5yr*/ αlpha | Morningstar Rating |
---|---|---|---|---|---|---|---|
1 | Scottish Widows Corporate Bd Trkr W Acc GB00BD7W3V17 | 5.764 | 19.03 -0.78 | 8.62 0.07 | 2.48 -0.51 | 5.39 0.43 | ★★★★ |
2 | iShares Corporate Bond Index (UK) L Acc GB00B5MMQ552 | 5.112 | 21.15 1.34 | 9.40 0.86 | 2.82 -0.17 | 5.27 0.31 | ★★★ |
3 | Invesco Corporate Bond UK Acc GB0033028779 | 3.949 | 14.09 -5.71 | 5.78 -2.76 | 2.52 -0.47 | 3.34 -1.63 | ★★ |
4 | M&G Corporate Bond GBP I Inc GB00B1YBRM66 | 3.569 | 21.14 1.33 | 8.75 0.20 | 3.12 0.13 | 4.83 -0.13 | ★★★ |
5 | Fidelity MoneyBuilder Income GB0003863916 | 3.400 | 20.56 0.75 | 8.55 0.01 | 2.19 -0.79 | 4.49 -0.47 | ★★ |
6 | Vanguard UK Inv Grd Bd Idx GBP Acc IE00B1S74Q32 | 3.179 | 20.36 0.55 | 8.34 -0.21 | 2.54 -0.44 | 5.04 0.08 | ★★★ |
7 | M&G Strategic Corporate Bond GBP A Acc GB0033828137 | 2.707 | 18.41 -1.39 | 6.77 -1.78 | 2.65 -0.34 | 3.61 -1.35 | ★★★ |
8 | Aviva Investors Corporate Bd 1 GBP Inc GB0004459359 | 2.693 | 19.81 0.00 | 8.34 -0.20 | 2.18 -0.81 | 4.40 -0.56 | ★★★ |
9 | Insight Buy and Maintain Bond B GBP Inc IE00B8FY2845 | 2.464 | 19.07 -0.74 | 6.66 -1.89 | 0.30 -2.68 | 0.00 0.00 | ★ |
10 | Royal London Sterling Credit Z Inc GB00B4W1ZT22 | 2.110 | 20.46 0.65 | 9.27 0.73 | 4.11 1.13 | 5.83 0.87 | ★★★★★ |
11 | Halifax Corporate Bd B GB0031809097 | 1.803 | 21.54 1.73 | 9.13 0.59 | 3.07 0.08 | 4.42 -0.54 | ★★ |
12 | Vanguard UK Short-Term IG Bd Idx GBP Acc IE00B9M1BB17 | 1.623 | 6.20 -13.60 | 3.16 -5.39 | 1.59 -1.40 | 2.07 -2.89 | ★ |
13 | Insight Inv UK Corp All Mat Bd S2 GB00B06FWY62 | 1.592 | 19.54 -0.27 | 9.42 0.88 | 2.95 -0.03 | 5.60 0.64 | ★★★ |
14 | Royal London Corporate Bond A Inc GB00B3P2K895 | 1.443 | 18.42 -1.39 | 8.17 -0.37 | 3.43 0.44 | 5.02 0.06 | ★★★★ |
15 | Threadneedle Stlg SD Corp Bd InsGrs Inc£ GB00BD8GMC64 | 1.438 | 6.70 -13.10 | 3.68 -4.86 | 1.98 -1.01 | 2.33 -2.63 | ★★ |
16 | L&G Short Dated £ Corporate Bd Idx C Acc GB00BKGR3F07 | 1.426 | 7.24 -12.57 | 4.07 -4.47 | 2.33 -0.65 | 2.82 -2.14 | ★★ |
17 | AI Sterling Corp Bond UK Corp GBP Inc GB00BTF89Z90 | 1.339 | 23.61 3.81 | 10.19 1.65 | 2.24 -0.75 | 0.00 0.00 | ★★ |
18 | ASI Corp Bd I Inc GB00BWK26H88 | 1.335 | 25.58 5.77 | 9.48 0.93 | 2.89 -0.09 | 5.10 0.14 | ★★★ |
19 | Rathbone Ethical Bond R Acc GB0030957137 | 1.321 | 16.60 -3.21 | 7.51 -1.03 | 4.57 1.58 | 5.06 0.10 | ★★★★★ |
20 | L&G Fixed Interest I Acc GB00B0CNHD88 | 1.312 | 24.09 4.28 | 10.29 1.75 | 3.18 0.19 | 5.59 0.62 | ★★★★ |
Top performing IG Sterling corporate bond funds ranked by rolling 1 year performance.
Rank | Fund / ISIN | Size (£mm) | 3mth/ αlpha | 1yr*/ αlpha | 3yr*/ αlpha | 5yr*/ αlpha | Morningstar Rating |
---|---|---|---|---|---|---|---|
1 | Fidelity Duration 20 Feeder Acc GBP GB00BVTVCQ05 | 52 | 67.13 47.32 | 24.65 16.11 | 4.28 1.29 | 0.00 0.00 | ★ |
2 | Fidelity Duration 16 Feeder Acc GBP GB00BVTVCP97 | 26 | 46.70 26.89 | 19.40 10.86 | 4.02 1.04 | 0.00 0.00 | ★★★ |
3 | Schroder Instl Long Dated Corp Bd I GB0009569327 | 347 | 48.92 29.11 | 19.37 10.82 | 4.95 1.97 | 9.39 4.43 | ★★★★★ |
4 | BlackRock ASF Ascent UK Long Corp Bd Fl£ IE0031465705 | 604 | 45.92 26.11 | 17.48 8.94 | 4.02 1.03 | 8.89 3.93 | ★★★★★ |
5 | Janus Henderson Instl Lg Datd Crdt I Inc GB0007475675 | 264 | 46.06 26.25 | 17.33 8.78 | 3.57 0.58 | 8.07 3.11 | ★★★★ |
6 | AI Non-Gilt Bd Ovr 15 Yrs IdxInsrdPenAcc GB00BYSL7Y58 | 346 | 50.61 30.80 | 17.21 8.66 | 0.00 0.00 | 0.00 0.00 | |
7 | BMO Long Dated Sterling Corp Bd 3 Acc GB00B8460N21 | 45 | 43.25 23.44 | 16.37 7.83 | 3.99 1.00 | 8.38 3.42 | ★★★★★ |
8 | Fidelity Instl Lng Dtd Stlg Corp Bd Inc GB0031400335 | 642 | 40.14 20.33 | 15.79 7.25 | 4.54 1.55 | 7.96 2.99 | ★★★★★ |
9 | BIBF Over 10 Year Corporate Bd B GBP Inc GB0099289679 | 0 | 39.81 20.00 | 15.68 7.13 | 3.94 0.95 | 6.94 1.98 | ★★★ |
10 | Insight Inv UK Corp Lng Mat Bd S2 GB00B06FXK91 | 457 | 37.01 17.20 | 15.64 7.09 | 4.05 1.06 | 7.74 2.78 | ★★★★★ |
11 | JPM Sterling Bond A (dist) GBP LU0053692744 | 69 | 39.59 19.78 | 15.61 7.06 | 3.14 0.15 | 7.50 2.54 | ★★★★ |
12 | PIMCO GIS UK L/T Corp Bd Instl GBP Acc IE00B0CNPY59 | 434 | 38.92 19.11 | 15.04 6.49 | 4.38 1.39 | 8.27 3.31 | ★★★★★ |
13 | BNY Mellon Long Corp Bd Exempt 1 Acc GB00B01X0Y17 | 27 | 33.91 14.11 | 13.66 5.11 | 3.62 0.63 | 7.26 2.30 | ★★★★ |
14 | Threadneedle Stlg MLD Corp Bd InsGrsInc£ GB00BD8GM715 | 320 | 30.51 10.71 | 12.66 4.12 | 3.57 0.58 | 6.67 1.71 | ★★★★★ |
15 | Fidelity Duration 10 Feeder Acc GBP GB00BVTVCN73 | 107 | 23.27 3.47 | 11.16 2.61 | 3.17 0.18 | 0.00 0.00 | ★★★ |
16 | Schroder All Maturities Corp Bd I Acc GB0009569541 | 1020 | 24.66 4.86 | 10.78 2.24 | 3.71 0.72 | 6.13 1.17 | ★★★★ |
17 | UBS Corporate Bond UK Plus K Acc Gross GB00B1QK7Q59 | 587 | 23.12 3.31 | 10.48 1.93 | 3.51 0.52 | 5.52 0.55 | ★★★★ |
18 | Schroder Sterling Corporate Bond A Inc GB0031093247 | 330 | 22.46 2.66 | 10.40 1.85 | 4.03 1.04 | 5.68 0.72 | ★★★★ |
19 | SWC (CH) Index BF Corp. W ex €/$ FA CHF CH0315621190 | 78 | 25.66 5.85 | 10.40 1.85 | 3.44 0.45 | 0.00 0.00 | ★★★★ |
20 | GS Sterling Credit I Inc GBP LU0386576077 | 22.56 2.75 | 10.34 1.80 | 2.88 -0.10 | 5.05 0.09 | ★★★ |
Table information: European domiciled funds in Morningstar Category GBP Corporate Bond, Oldest share class, All figures GBP sterling (£), Total returns annualised, as at last month end. Alpha is the measure of an investment’s return in excess of the Morningstar Category average.
Fund sizes are as reported by the management groups and the latest available to Morningstar. The Morningstar Rating is calculated based on a fund’s total returns, adjusted for risk and sales charges, relative to other funds in its Morningstar Category, based on a weighted average of a fund’s 3-, 5-, and ten-year ratings, depending on the length of its record.
Data source: © 2019 Morningstar, Inc. All rights reserved.
The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Important note regarding third party indices: Morningstar does not own any third party index data (S&P, FTSE, MSCI), so cannot authorise its use. The journalists should contact each vendor directly to get authorisation for the data they require.