Winners rationale

As investors seek to diversify their portfolios in times of substantial and prolonged volatility, investment grade bonds have been playing a prominent role in high yield and tech stock-heavy portfolios of HNWIs in Asia. In terms of managing investment grade strategies, Invesco has gone from strength to strength, and in 2020 it distinguished itself from peers by outperforming in terms of performance, risk management, and client services.

Invesco’s flagship investment grade strategy — Invesco Global Investment Grade Corporate Bond Fund — has seen tremendous asset growth, from US$2.1 billion at the beginning of 2020 to US$ 3.5 billion. Meantime, the fund’s performance has been ranked in the top decile on a five year basis and since inception. In addition to that, it has outperformed its benchmark over every three year period since inception.

To generate this impressive track record, the strategy — which is benchmark-agnostic — has successfully identified the key long term driver of credit markets across key thematic risk factors. Some of the current themes include: “Secular stagnation reinforced: prolonged low growth and subdued inflation”; “Financial deleveraging trends with improvement in asset quality and capital”; and “Defensive play on the energy recovery story”.

The investment themes typically target opportunities across regions, sectors, and currencies of the bonds, yield curve and capital structure. The most appropriate bonds to reflect these views are then selected by the firm’s global credit analysts team, which works alongside the portfolio managers to populate the investment themes. This approach to security selection focuses on ‘avoiding the losers’ rather than ‘selecting only the winners’, resulting in highly diversified portfolios, with reduced idiosyncratic risk.

During COVID-19, when in-person meetings became more difficult than ever, Invesco has understood that its private bank partners and end clients need materials that are quick to the point, reader-friendly and digital. In response to these needs, the firm stepped up its digital promotion, and its sales and marketing staff have been proactively providing customised content to its clients.

To better equip and engage its private banking clients, the firm has developed a dedicated website for the investment grade strategy, detailing everything from previous financial crises, asset class performance, default rate analysis and the fund’s thematic approach and track record performance.

Invesco is Asian Private Banker’s Best Fund Provider – Investment Grade Bond.

Winners rationale

Since 2010, Silverdale Capital’s reputation as a provider of quality, differentiated investment strategies has gone from strength to strength due to the firm’s outperformance in three key areas: innovation, risk management, and performance.

This dedication was arguably most evident in its flagship Silverdale Bond Fund — an ‘uncommon’ open-ended bond fund, which invests in investment grade, short-duration US dollar bonds but still managed to deliver an 8-10% return per year. Not only did it rank among the top decile in terms of performance, it also led the pack in risk management.

Specifically, the Silverdale Bond Fund, which is a weekly fund paying around 6% per year as dividend, has delivered 62.09% returns over 6 years (as at 27 September 2019) at 8.19% per year and against 36.62% returns delivered by iShares tracking the J.P. Morgan EM Corporate Bond Index. Its internal leverage feature is unique, insofar that it is ring-fenced and therefore investors are never at risk of receiving a margin call, nor are they required to service loan interest or provide guarantees to secure the leverage.

Factor in the emphasis Silverdale Capital placed on employing among the most experienced investment specialists and innovative methodologies (including Silverdale’s proprietary cashflow modelling which involves determining the fungible cash available to the issuer entity as well as debt priority), and exercising complete discipline throughout the trade on the premise that “it’s when you sell that counts”, and it’s little surprise that here in Asia — where consistent, predictable income remains a primary theme for investors — interest in and demand for the strategy has continued to rise.

Silverdale Capital’s focus on excellence was evidenced in its approach to investor service. The firm provides portfolio highlights and information on a weekly basis, unlike most bond funds which do so monthly or quarterly. Its commitment to transparency extends to sharing details of actual trades done, with a brief rationale, and making its fund factsheets available on its website which is universally accessible. The firm also holds quarterly investor calls for investors across the globe, during which Silverdale Capital’s CIO makes the point of burrowing down into the rationale and drivers of the strategy’s performance and discussing current views and action points for the ensuing quarters.

Silverdale Capital expects that insipid global growth will continue to provide an excellent carry of circa 8-10%, with further potential gains as a result of tightening credit spreads, without a corresponding increase in the cost of borrowing. Thus, the manager and its Silverdale Bond Fund, are well-positioned to deliver best-in-breed performance over the next decade.

Silverdale Capital is Asian Private Banker’s Best Fund Provider – Investment Grade Bond.

Winners rationale

As investors seek to insulate their portfolios in times of substantial and prolonged volatility, longer duration investment grade bonds with conventionally low yields continue to play a prominent role in portfolio construction, despite contending with snowballing borrowing costs as interest rates ratchet up.

In a bid to alleviate investors’ anxiety in times of uncertainty, PIMCO developed its Asian distribution of investment grade bonds that occupy the sweet spot between high yield or riskier investments and safe haven assets, offering investors a balance between stability and income generation as they navigate the choppy waters of today’s market environment.

PIMCO’s seasoned line-up of investment grade credit portfolio managers and industry-specific credit analysts targets the relative value opportunities between sectors and companies to generate returns, favouring companies with high barriers to entry, superior growth potential, robust pricing power, superlative asset quality, and management terms that are supportive of bondholders.

Investing predominantly in creditworthy corporate issuers possessing a debt rating of BBB- or higher from reputable credit-rating agencies, PIMCO’s Investment Grade Credit strategy adopts a disciplined approach in credit selection with a clear aim of sustaining long-term performance. Apart from corporate bonds, its credit universe includes investment grade sovereign bonds as well as supranational issuers. The fund has demonstrated its ability to deliver over the long run, outperforming the Bloomberg Barclays Global Aggregate Credit Index (USD Hedged) over both ten-year and since-inception periods on a net-of-fees basis.

Unlike typical fixed income strategies where returns are elicited primarily by interest rate fluctuations within a specific country or region, PIMCO’s Investment Grade Credit strategy offers investors exposure to investment grade credit while PIMCO continually makes tactical sector, industry, and issuer decisions, enabling optimal exposure amid fluctuating economic and market environments.

Having employed investment grade corporate bonds as a key component of its investment arsenal for core fixed income portfolios since 1971, PIMCO has been voted Asian Private Banker’s Best Fund Provider – Investment Grade Bond.