Please find attached the latest version of our Monthly Fixed income market outlook. The article highlights our expectations regarding rates , credit risk and the market in general.
- While employment news has shown modest indications of gradual improvement, government sector jobs cutbacks could weigh on the recovery.
- Economic growth is picking up but market risk has been growing, leaving us wary of a correction.
- Investors should continue to focus on asset classes which did well in 2010, though robust risk management will be key given the potential for market volatility.
Also please see below a few comments regarding our current fixed income offering, and the performance YTD of the funds A2 shares in USD as of December 31st 2010 . Please feel free to contact us if you require additional information in any of the funds mentioned below.
1) Defensive Fixed Income: For clients that don’t want to take much credit risk and are looking for funds with high Government bond exposure. Please keep in mind that these funds have duration risk.
BGF Global Government Bond Fund: 4.12%
BGF Global Inflation Linked Bond Fund: 4.79%
BGF US Government Mortgage: 6.09%
2) Core Fixed Income: For clients that are looking at funds with diversified exposure across sectors. These funds invest in a combination of Government and non-government securities across different duration ranges:
BGF World Bond: 4.30%
BGF World Income: 2.50%
BGF US Short Duration: 4.90%
BGF US Core Bond: 7.83%
3) Aggressive Fixed Income: For clients that are willing to take higher credit risk in order to maximize the total return of their fixed income portfolio. These funds have higher volatility than traditional defensive or core fixed income funds, but can also have higher returns.
BGF Global Corporate Bond: 6.63%
BGF Global High Yield: 15.45%
BGF US High Yield: 15.88%
4) Opportunistic / Unconstrained Fixed Income: The fund doesn’t have a benchmark, and invest exclusively on those areas of the market where BlackRock believes investors will get the most interesting returns. The fund can change it’s allocation and risk profile depending on BlackRock’s views on the fixed income market.
BGF Fixed Income Global Opportunities: 6.80%
5) Emerging Markets Fixed Income: The Emerging Markets Bond and the Asian Tiger Bond have limited amount of currency risk as they focus on sovereign and credit bonds issued in USD, while the Local Emerging Markets focuses on sovereign debt with short duration issued in local currency. While the first two are a play on the spread compression between EM and developed bonds, the later one is a play on the appreciation of EM currencies versus USD.
BGF Emerging Markets Bond: 12.79%
BGF Asian Tiger Bond: 13.05%
BGF Local Emerging Markets Short Duration: 5.22%
** All performance is preliminary. Past performance is not an indication of future returns. Please refer to the fact sheet of the individual funds for further performance disclaimers. This information is for Financial Professionals use only.