Aussie fixed income managers with global teams outperform: Zenith

In the Australian fixed income sector, fund managers that ran global teams outperformed those with domestic-only teams over the 10 years to April, according to the latest research from Zenith Investment Partners.

However, the edge in the global-teams' performance came with a spike in risk volatility.

The research looked at 24 fund managers in the Australian fixed income space. Eleven of these had domestic-only teams while 13 had hybrid teams with a blend of domestic and offshore resources.

Globalised managers delivered 6.2% in returns whereas local teams returned 5.7%. The former also recorded 0.15% higher annualised risk volatility than local teams managing Aussie fixed income.

PIMCO and Western Asset are two examples of managers that run globalised teams to vet opportunities in Australian fixed income.

Zenith analyst Andrew Yap said the performance edge for globalised teams came from the shifting landscape of debt issuers in the Australian fixed income space.

"It all goes to the evolution of the market place. Since the GFC, we have seen larger global issuance in Australia. Meaning instead of your BHPs and Australian banks issuing debt, lots of global issuers are coming to Australia," Yap said.

"If you have a local-only team, it is sometimes difficult to assess these opportunities than if you had a global team that already knows these companies."

However, managers with globalised teams may take potentially off-benchmark positions, accounting for their 0.15% higher risk volatility than Australia-only fund managers.

"For financial advisers selecting Australian fixed income funds, we believe each approach has its advantages and there are merits to both. While globalised teams are potentially at a relative advantage with respect to the timely research of offshore companies issuing bonds in Australia, this can be offset by a local player if they have superior interest rate management or savvy trading skills," Yap said.

Read more: Fixed incomeZenith Investment PartnersAndrew YapPIMCOWestern Asset
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