Winners rationale

BlackRock’s pedigree in managing fixed-income investments particularly shone through in its emerging market bond funds, as investors sought yields in an unprecedented wave of monetary easing in 2020 — a reaction by central banks and governments to the COVID-19 pandemic.The three funds under consideration for the category were the BlackRock Global Funds (BGF) China Bond Fund, BGF Asian Tiger Bond Fund and BGF Asian High Yield Bond Fund.

The BGF China Bond Fund generated strong returns with positive returns net of fees in every single calendar year since inception as well as over any one-year rolling period. As of August 2020, the fund generated 7.65% over one year, 6.29% annualised over three years, and 6.69% annualized over five years.

In the A2 CNH share class, realised volatility was only 2.6% over the past five years, despite highly volatile markets in 2020. A testament to BlackRock’s standout performance was that the fund generated positive returns on a one-year rolling period basis even during the sell-off in March of 2020.

The BGF China Bond Fund has been recognised by clients as a solution for high income at low volatility rather than simply a China access fund. It benefits from its consistent top-decile performance, attractive yield and differentiated approach. It invests tactically across all China bond markets. In 2020, it witnessed the largest net inflow year-to-date, dominating its peer group by size with AUM to over US$2.6 billion as of August 2020 from less than US$200 million at the beginning of 2020.

The strong performance of the fund was due to tactical allocation skills. In 1Q20, the fund increased its allocation to onshore RMB bonds to 40%. Subsequently, the onshore bond market generated positive returns despite the global liquidity crunch in March 2020. Post the March sell-off, the fund started to relocate capital from onshore to 80% offshore, because of the attractive valuations. That helped the fund capture the sharp recovery in light of the unprecedented easing in the offshore market.

Since September of 2020, the fund trimmed its exposure to high-yield in the offshore space and relocated into onshore IG space to increase portfolio resilience ahead of US elections. The onshore market is a risk-off market which can help to serve as a hedge against global volatilities.

For its part, the marquee BGF Asian Tiger Bond Fund (A2 USD) returned 4.27% year-to-date as of August 2020, 5.04% for one year, 4.03% for three years and 4.88% on a five year basis. The Fund has performed well and is ranked a 4 star and Silver rating (A2 share class) from Morningstar.

The BGF Asian HY Bond Fund (A2 USD) returned 6.13% year-to-date as of August 2020, 9.33% on a 1-year basis, and an annualised return of 5.55% since the inception of the fund in December 01, 2017, outperforming its ICE BofAML Asian Dollar High Yield Corporate Constrained Blended Index benchmark and generating top Morningstar quartile performance relative to peers across all periods since its inception.

In anticipation of the major part of 2020’s selloff, the BGF Asian Tiger Bond Fund reduced portfolio beta in February and raised cash buffers to 6% levels. The fund also de-risked through reducing positions in some higher beta areas that could have faced liquidity constraints and consequently, during the March/April 2020 period, the fund was able to effectively manage liquidity. It did not have to undertake forced selling to meet redemptions and kept the shape of the portfolio constant.

This fleet-footedness helped BlackRock distinguish itself from peers in terms of managing bonds in emerging markets. For a strategy that generated higher returns in market risk-on environments and protected against the downside in risk-off environments, BlackRock has been selected as Asian Private Banker’s Best Fund Provider – Emerging Market Bond.