The funds most sensitive to a Fed rate hike
With the Federal Open Market Committee expected to raise interest rates for the first time since 2006, we thought it a good idea to look at the funds that would be most affected by a decision.
To that end, we asked fund research house, PureGroup to look at four IA Sectors: Global Emerging Markets, Global, US Equity and US High Yield and Corporate Fixed Income sectors.
These sectors were run through PureGroup’s macro factor screen, after a filter of £100m in Asset Under Management was applied and, what follows are the top 10 most and least sensitive funds in each sector.
Based on macro-economic factor analysis, PureGroup’s quantitative analytical model is designed to create a clear, easily comparable assessment of a fund’s likely expected return over the next 12 months against its peer group based on its relationship to the wider macro-economic and business cycles in order to provides insight into “how different funds are likely to react to a given factor.
The US High Yield and Corporate Fixed Income have been combined into one as both are quite small. And, Pure Group was quick to point out that a change in US rates will undoubtedly not be the only driver of returns.
Also, for the GEM and Global universes, a leading country basket of rates as a factor. But, PureGroup said, “the US rate would be the most influential within that basket.”
+ve value funds will have a tailwind to performance when rates rise, -ve value funds will have a headwind to performance when rates rise. The size of the value indicates the significance of this impact
