Corporate bond funds the most consistent performers – BMO GAM

Retail funds are still struggling to deliver consistent top-quartile returns but IA Corporate Bond is doing a better job than most, according to BMO Global Asset Management.

Corporate bond funds the most consistent performers – BMO GAM


The latest Fund Watch survey from BMO’s multi-manager team showed that over the past six months, the sector has beaten all others in terms of delivering consistent top-quartile performance over the period.

Over the past two consecutive quarters, 12.5% of funds in IA £ Corporate Bond achieved top-quartile results, up from 9.9% in Q2.

Following this were IA Global Emerging Markets, which showed 5.2% IA Global Bond, with 4.9% delivering top-quartile results.

Five sectors as classified by the Investment Association lacked any top quartile funds in Q3: IA Asia Pacific ex Japan; IA Europe ex UK; IA Japan; IA North America; and IA £ Strategic Bond.

BMO said its consistency ratio for top-quartile returns over three years picked slightly in Q3 2016, with 2.5% of funds, or 28 out of the 1,137 funds in the IA 12 major market sectors, achieving consistent top-quartile returns.

While this showed an increase from the 1.8% posted in Q2, it still languished at the lower end of the usual range – by historical standards – of 2%-5%.

The survey also showed that all sectors demonstrated positive returns over the quarter, with IA China/Greater China the best-performing sector in the three months, with a rise of more than 18%.

IA Technology & Telecommunications rose 17.6%, while IA UK Smaller Companies was up 14.9%.

Longer-duration fixed assets were performing well off the back of the Bank of England’s decision cut the base rate to 0.25% following the EU Referendum, pushing out expectations of any interest rates rises even further.

As such, IA UK Index Linked Gilt rose 13.8% in the quarter, followed by IA £ Corporate Bond, which gained 6% and IA UK Gilt, which rose 4.6%. This compared to a 3.8% rise from the IA Global Bond sector.

Kelly Prior, investment manager for F&C Multi-Manager Solutions, said: “With five of the 12 sectors failing to have a fund with consistently top-quartile performance for the second quarter in a row it seems that repeatable good performance is as scarce as ever.

“The increasing consistency of IA £ Corporate Bond funds coincides with the start of the fall in bond yields around the globe as central banks around the world prop up slowing economies. Meanwhile consistency in core markets such as the UK, US and Europe seems as rare as ever.”