Aussie fixed income outshines Aussie equities

ETF fixed income government bonds Aussie bonds

7 August 2020
| By Laura Dew |
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There has been much better performance among Australian fixed interest funds compared to their equity peers in the first half of 2020, especially from funds focused on government bonds.

According to FE Analytics, within the Australian Core Strategies universe, out of 97 funds in the Australian bond sector, only six funds in the whole sector had seen losses in the first half of 2020.

This was in sharp contrast to the Australian equity sector where only six funds in the sector had reported positive returns and over 100 saw double-digit losses.

The best-performing Aussie bond fund over the six months to 30 June, 2020, was Russell Australian Bond which returned over 8%.

Other top-performing Australian bond funds over the period included QIC Australian Fixed Interest which returned 7.4%, GAM FCM ILS Yield which returned 5.6% and Pendal Fixed Interest which returned 5.4%.

The worst-performing fund was Yarra Enhanced Income Direct which lost 3.1%. However, this was far less than the worst-performing Australian equity fund which lost more than 50%.

The Yarra Enhanced Income fund also saw losses of 2.7% as well as the Pendal Dynamic Income fund, VanEck Vectors Australian Subordinated Debt ETF, DDH Preferred Income and BetaShares Active Australian Hybrids. These lost 1.7%, 1%, 0.8% and 0.08% respectively.

It was mixed results for BetaShares where its Australian Government Bond ETF was one of the best-performing funds over the period with returns of 5.1% but the Active Australian Hybrids fund was one of the worst with losses of 0.08%. Its Australian Bank Senior Floating Rate Bond ETF returned 1% and the BetaShares Legg Mason Australian Bond fund returned 3.2%.

Last month, it was reported market share for fixed income exchange traded products declined from 30% in 2019 to just 3% in 2020 with investors favouring equity vehicles instead.

However, several ETFs in the sector reported returns above the Australian bond sector average of 2.5% including Russell Australian Government Bond ETF (4.6%), Vanguard Australian Government Bond Index ETF (3.7%) and BlackRock iShares Treasury ETF (3.7%).

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