According to Lipper FundFile data, flows into bond funds in Europe in the nine months to September 2014 (€150bn) are double those going into equity funds (€75bn), showing just how resilient the bond rally has been. High yield has been a prime beneficiary as investors eke out income in an ongoing low-interest-rate environment.

In local currency terms European high yield, with a 7.9% return, has had the strongest 12 months, with global high yield returning 2.2% over the same period. European fund-of-fund managers have generally done well, opting for local high-yield exposure (258 buyers for European high yield as opposed to 174 buyers for U.S. high yield) and using over 350 different funds and share classes to obtain their exposure.

Table 1. Performance of Lipper High Yield Bond Classifications - 12 Months to End of September 2014 (in Local Currency).

Performance of Lipper High Yield Bond Classifications - 12 Months to End of September 2014

Source: Lipper, a Thomson Reuters company.

Nordea 1-European High Yield Bond BI EUR, with 39 buyers, has proven the most popular and has returned 8.6% over the last 12 months. Muzinich Short Duration High Yield Hdg EUR Acc—in the USD Bond HY sector, with 32 buyers and a more modest 1.8% return—has come in as the second most popular fund. There is only one fund with lower performance: Euro Renten HY P, with 0.5% for the 12 months and with one European buyer.

Table 2. List of High Yield Bond Funds Ranked by European Buyer Popularity (September 2014).

List of High Yield Bond Funds Ranked by European Buyer Popularity (September 2014)

Source: Lipper, a Thomson Reuters company.

The top-performing fund in this space has been City Merchants High Yield Trust PLC, with a 26.6% return for the last 12 months. This has also been written by only one European buyer. Well-represented strong performers include Neuberger Berman High Yield Bond USD Inst Acc, with 13.1%; Jupiter Strategic Bond I Inc GBP, with 14.7%; and Kames Capital High Yield Bond Inc B, with 13.3%.

Passive options, generally less popular in fixed income funds than in equity funds, make three appearances in the 25 most popular funds, with iShares Euro High Yld Corporate Bd UCITS ETF—with 28 buyers—coming in fourth place overall.

Lipper's Jake Moeller examines how European fund-of-funds managers are gaining their exposure to high yield bond funds in September 2014.

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Jake Moeller

Jake joined Thomson Reuters Lipper in 2013 as Head of UK & Ireland Research. He has over eighteen years experience as an expert in mutual fund research, fund-of-funds portfolio management and asset allocation strategies. He spent six years managing the fund-of-funds suite and guided fund platform at AIG and has been a mutual fund research specialist for Lloyds Banking Group, Towry and the Commonwealth Bank of Australia. Jake is a Chartered Member of the Chartered Institute of Securities & Investment (CISI) and a Senior Fellow of the Financial Services Institute of Australasia (Finsia).

Website: lipperalpha.financial.thomsonreuters.com/contributor/jake-moeller/


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