Winnersrationale

Asia’s high-yield markets endured a largely torrid 2021, on account of an epic bout of volatility among Chinese real estate issuers in the second half of the year that dragged down performance across much of this traditionally popular asset class.

Still, some fund managers did better than others in terms of damage control, with the liquidity crisis at China Evergrande wreaking havoc on many portfolios.

The Goldman Sachs Asia High Yield Bond Portfolio, a relative newcomer on the radar of private bank clients, was a standout in this regard. While it launched little over a year ago, the Fund delivered a robust performance during the assessment period in the face of treacherous market conditions, helped by the fact that Goldman Sachs Asset Management has been investing in Asia High Yield for over a decade. In the year-to-date to August 2021, the fund’s base share class returned net 1.61% — a performance that topped both the benchmark ICE BofA Asian Dollar High Yield Corporate Sector & Issuer Constrained Index and the negative return of many of its peer funds1. Performance was stronger over a 12-month period, at 7.29% (net) versus 6.17% for the benchmark.

Much of that alpha can be attributed to the fund’s approach of seeking a higher level of country diversification relative to the benchmark’s heavier weighting to China. This dynamic approach involves covering the Asia high-yield universe via a bottom-up process with a focus on default avoidance. That has allowed the fund’s managers to avoid some of the weakest elements of China’s property market and instead focus exposure on what they view as faster growing ideas in the region, such as ports in the Philippines, Malaysian healthcare and utilities in Vietnam.

Among the other sources of outperformance were allocations to issuers in the renewables sectors in India and Indonesia, where credits benefited from policy tailwinds.

Since the fund’s launch in August 2020 it has grown to US$450 million in assets under management, drawing on the strength of Goldman Sachs Asset Management’s relationships with over 30 private banks across Asia. Much of those flows have been driven by private wealth, including via external asset managers and family offices.

Goldman Sachs Asset Management is Asian Private Banker’s Best Fund Provider – Asia Pacific High Yield Bond.

¹ The base share class of the Goldman Sachs Asia High Yield Bond Portfolio returned 1.61% year to date, as of 31 August 2021, outperforming the ICE BofA Asian Dollar High-Yield Corp Sector Issuer Constrained Index 1.35% by 26 bps on a net basis. Since inception, the net returns for the share class were 7.32% (annualised), as of 31 August 2021.