Global fixed interest funds outstripped their global equity fund counterparts over the 12 months to February 2001, according to the latest figures from ratings agency Standard & Poor’s (S&P).
The S&P report shows that over the year, depending on their base currency, the average global bond fund returned between 3.1% and 12.4%, while over the same period the average global equity fund appreciated by 2.8% in sterling terms but fell by more than 7% in dollars.

The report divides funds into four currency sectors, euro, sterling, Swiss franc and US dollar. The dispersion of returns within the sectors was narrower in 2000 than a year earlier, except for the sterling bond fund sector, which saw a marginal widening of results.
In the latest report, the top performing sterling bond fund returned 22% and the worst one lost 1%. A year before, the margin was 20 percentage points.

Funds overweight in US bonds yielded the highest returns: Optigest Global Fixed Income invested more than twice the amount of its benchmark in US bonds, which gave it a lift to an A rating from S&P.
“ Dollar based funds fared particularly well, for the second year in succession with the average fund outpacing its relevant Salomon world government bond index benchmark,” says James Tew, European head of research at Standard & Poor’s.

Another major success factor, according to the report, was whether investment went into emerging market bonds, which “significantly” beat the major bond markets over the review period.
INVESCO GT (now INVESCO Perpetual) Strategic Bond Fund was the fourth in the US$ global sector due to its 60% exposure to emerging market debt.

Currency allocation was also an important factor in fund performance: those with a dollar preference over the euro did well, says the report. Longer duration exposure, in comparison with relevant benchmarks, was another way to counter falling interest rates, according to the research.

The four global bond funds, which received an AAA rating, are JP Morgan’s global fixed income fund and international fixed income fund, Rorento NV and the new top grader, ACMGI’s global bond fund. ABN AMRO’s global bond fund fell a rating band, down to AA.