The three-year performance figures of strategic bond funds have improved significantly now the Greek debt crisis is no longer included in the numbers, according to a multi-manager team.
F&C Investments’ Gary Potter and Rob Burdett said the IMA Strategic Bond sector had, in the third quarter, produced the most funds with consistent top-quartile returns in the past three consecutive years.
In its latest quarterly Multi-Manager FundWatch survey, the duo said that the sector had helped raise the number of UK-based funds delivering top-quartile returns to 4.5 per cent (49 out of 1,099) – near the historical high of 5 per cent.
“With the time period now moving on from the eye of the Greek crisis storm and into the window of a prolonged period where risk assets outperformed, we saw some stark changes last quarter with a rotation in the consistency winners,” Mr Burdett said.
“The IMA Strategic Bond sector was the clear winner in Q3 2014. Not only did it top the charts for top-quartile returns over three years, it also secured the most funds achieving median returns over the same period, with nearly a third achieving this feat.”
The multi-manager said this was a step change for the sector, which had failed to record any top consistent funds in the previous three quarters.
In contrast, the IMA Japan sector was the only sector that failed to have any consistent top-quartile funds, Mr Burdett said, because ‘Abenomics’ had caused “a sea change in markets and the yen during the period”.
The survey also revealed, of the 37 IMA sectors, the IMA North America sector achieved the highest return in the third quarter of 2014, generating 5.36 per cent and benefiting from strong corporate earnings and encouraging economic growth.
Mr Burdett said in a period when geopolitical concerns were high in eastern Europe and risk assets were sold off, the IMA European Smaller Companies sector “fared the worst” of the sectors. However, there was a “broad spread of returns within the IMA fixed income sectors”, he said.
“A decrease in bond yields at the slightly longer end of the curve caused the IMA UK Index Linked Gilt sector to generate 4.9 per cent, while the IMA High Yield sector fell 2.4 per cent as a result of the pullback in risk assets,” he added.
The multi-manager team said with monetary policy at different stages in different countries, different economies’ performances were beginning to diverge.
Kelly Prior, an investment manager on the F&C multi-manager team, said: “This will no doubt create opportunity, but also volatility and a more difficult environment for fund managers to perform consistently.”