BGF Asian Tiger Bond Fund seeks to capture evolving opportunities in Asia by investing across the credit spectrum, flexibly positioning the portfolio to generate potentially long term competitive risk-adjusted returns regardless of market conditions.
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Benefits of BGF Asian Tiger
Bond Fund
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Relative value matters in an environment of higher volatility and lower expected returns. Asian USD credit has the ability to diversify a fixed income portfolio while targeting to generate positive return at lower volatility.
Sources: Bloomberg and J.P. Morgan estimates, Dec 2019.
Source: BlackRock, 30 Jun 2020. For illustrative purposes. Asian Credit Represented by JPM Asian Credit Index; Global Aggregate represented by BBG Barc Global Agg Index; EM Corporates represented by JPM Corp EMBI Broad Diversified Composite Index.
In an uncertain market environment, a portfolio with the flexibility to dynamically adjust its asset allocation is key. BGF Asian Tiger Bond Fund has the ability to invest opportunistically across the region targeting to find positive income while depending less of market conditions.
Asian credit’s improving fundamentals and resilient credit metrics are supportive for the region. This is reflected in the improving 12-month rolling upgrade / downgrade ratios.
Improving upgrade/downgrade ratios
Source: Point, 8 May 2020. For US AA, A, BBB: Bloomberg Barclays US Aggregate Credit Index. For Asia AA,A, BBB: Bloomberg Barclays EM Asia USD Credit Index
Source: Point, 8 May 2020. For US BB, B: Bloomberg Barclays US High Yield Index (2% Issuer Cap)
For Asia BB, B: Bloomberg Barclays EM Asia USD Credit Index
Growth of Hypothetical 10,000 performance since launched in 1996
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Source: MorningStar, 30 Jun 2020
Performance is shown on a NAV to NAV price basis with income reinvested for A2 USD share class. Performance of the respective share classes, are net in share class currency on a NAV pricing with income reinvested as at end Jun 2020. *Performance after maximum 5% Front End Load: A2 USD :YTD: -4.24%, 1 Year: -1.57%, 3 Years annualised: 1.72%, 5 Years annualised: 2.82%, Since PM transition (31 Jul 2012) annualised: 3.69%. Past performance is not a guide to future performance. Investors may not get back the full amount invested.
Your Top 6 Questions Answered
There are often questions on why you should consider an allocation to Asian fixed income and the BGF Asian Tiger Bond Fund in the current environment. We try to address the most common concerns for investors.
“Why should I allocate to this fund and asset class in today’s environment?”
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Global economic growth is expected to slow and interest rates remain low; assets that can generate stable income will be appealing to investors. In fact, having the flexibility to adjust asset allocation based on changing market opportunities and conditions plays a vital role. BGF Asian Tiger Bond Fund has the ability to invest opportunistically across regional fixed income in the search for positive income while depending less on market conditions.
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Asian credit may be a good complement to US credit in the current market condition. In general, at similar credit rating profile, yields for Asian Credit would be higher while duration risks are lower. In the current environment, taking lower duration risk is important to keep exposure to broader market risk within manageable levels.
Yield Average credit rating Duration Asian Investment Grade 3.42% A- 4.88 US Investment Grade 2.62% AA 5.34 Asian High Yield Credit 7.18% B+ 2.97 US High Yield Credit 6.09% B+ 3.39 Source: BlackRock, Bloomberg, end May 2019. Asian Investment Grade refers to JPM Asian Credit IG Index; US Investment Grade refers to BBG Barc US Agg Index; Asian High Yield Credit refers to JPM Asian Credit non-IG Index; US High Yield Credit refers to BBG Barc US Corp HY 2% Issuer Capped Index. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
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We believe global monetary policy is on an accommodative trajectory. This benefits Asian Credit because:
• US treasury yields are a component of Asian Credit yields, so when they go lower/are stable, it supports price returns.
• Lower rates in developed markets make emerging market assets more attractive for income-oriented investors.
• An accommodative Fed supports investor sentiment towards emerging market local markets – an area that the BGF Asian Tiger Bond Fund tactically invests in.
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More than US$10 trillion developed market government bonds currently yield negative* return, as a result of consistently low interest rates in the post-GFC era. With a growing ageing population, there is a strong demand for investment tools that can offer stable income. Quality bonds would remain in high demand even as the market prices in the risks arising from market uncertainties.
In Asia, sovereign fundamentals remain supportive. Although fundamentals (and therefore vulnerabilities) vary very widely across emerging markets, Asia is on a stronger footing vs. broader emerging markets.
*Source: BlackRock, Bloomberg, Financial Times, as of May 2019
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Asian credit’s improving fundamentals and resilient credit metrics are supportive for the region. We see lower risks of downgrade / default and resilient corporate credit fundamentals.
Asian bond investors are mostly domestic (as of 2Q2019: 70-80%* of investors in Asian credit were from Asia), meaning a stickier investor base less likely to redeem during drawdowns.
Furthermore, over the past 10 years, Asian credit# and the BGF Asian Tiger Bond Fund has returned negative performance in only two years.
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 BGF Asian Tiger Bond Fund (%) -3.2 6.7 4.7 2.3 8.2 -3 14.2 1.9 13.1 26.2 Benchmark# (%) -0.8 5.7 5.8 2.8 8.3 -1.4 14.3 4.1 10.6 28.3 *Source: JP Morgan, Bond Radar, as of May 2019
#JP Morgan Asian Credit Index
Source: Bloomberg, 31 December 2018
BGF Asian Tiger Bond Fund A2 USD. Inception date: 2nd February, 1996. YTD: 10.50%. Performance with 5% front end load are: 2018: -8.0%, 2017: 1.4%, 2016: -0.5%, 2015: -2.8%, 2014: 2.8%, 2013: -7.8%, 2012: 8.43%, 2011: -3.2%, 2010: 7.4%, 2009: 19.9%, YTD: 5.0%. Data as of 31 August 2019.
Past performance is not a guide to future performance. Investors may not get back the full amount invested. Performance is shown on a NAV to NAV price basis with income reinvested for A2 USD share class. Fund performance figures are calculated net of fees. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index. -
Investors in Asian fixed income have recently been focused on China. The inclusion of Chinese onshore bonds into a global index (Bloomberg Barclays Global Aggregate Index) was a milestone in the ongoing opening-up of Chinese markets to international investors. Most analysts expect other global index providers to follow suit, bringing significant inflows to the domestic bond markets. The BGF Asian Tiger Bond Fund will benefit from its flexibility in being able to invest in both onshore and offshore Chinese bonds.
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