No place to hide for alternatives
There was no place to hide for funds in the alternative income space in 2008, according to the latest sector review produced by ratings house Lonsec.
The Lonsec Alternative Income Sector Review, released this month, said funds had found no place to hide because “all credit markets experienced varying degrees of market price stress”.
However, the review analysis pointed to improving fortunes in the sector, stating that so far in 2009, risk appetite appeared to have returned and that investment grade credit had rallied strongly from what had been the highest spreads in 50 years.
It said this had been outstripped by high yield bond and loan markets and that the high yield bond market had even outpaced the equities market, driven in part by a surge in retail demand in the US.
Looking at events over the past 12 months, the Lonsec review said more globally focused funds, such as the BlackRock Monthly Income Fund, the CFS Global Credit Income Fund, the Credit Suisse Global Income Fund and the Principal Global Strategic Income Fund, had been impacted by more savage mark-to-market write-downs than those with more moderate exposures.
However, it noted that, on the upside, global funds reported better liquidity or a more rapid return to liquidity than their Australian-focused counterparts.
The Lonsec review saw just one fund, the Macquarie Income Opportunities Fund, emerge with a ‘highly recommended’ rating, while eight funds received a ‘recommended’ rating and three an ‘investment grade’ rating.
Two funds, the CFS Income Fund (Wholesale) and the AMP Enhanced Yield Fund, remained ‘on hold’.
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