SINGAPORE - UOB Asset Management's Singapore dollar debt fund is beating most peers by buying perpetual bonds and investing 70 per cent of its money overseas as rates on bank deposits and sovereign yields approach zero.
The S$435-million United SGD Fund managed by the unit of United Overseas Bank counts seven perpetual bonds among about 50 securities in its portfolio as of June 30, including Westpac Banking's debt, according to the fund's semi-annual report.
The manager also bought floating-rate notes sold by Standard Chartered and Korea First Bank maturing in 2018 and 2034, respectively.
"We want to diversify across countries, sectors and structures, and perpetual bonds are an added spice to dish," said Ms Joyce Tan, co-head of Asian fixed-income investment at UOB Asset Management.
"It's still a short-term bond fund."
Ms Tan oversees a team of 20 credit analysts and scours the region for 70 per cent of investment denominated in foreign- currency bonds. Those assets are fully hedged, covering investors against currency risk, she said.
"The euro-dollar market offers better risk-adjusted return in terms of better liquidity, wider choices and compelling valuations. The bonds are commonly rated and the issuers have longer track records."
The picks helped the plan return 5.1 per cent this year through Aug 29, topping 76 per cent of rivals including investment vehicles managed by Fullerton Fund Management and Nikko Asset Management, data compiled by Bloomberg show.
That outpaced the city's 4.9 per cent average inflation this year and compares with the 0.26 per cent bid-rate on the six-month Singapore interbank offered rate and 0.5 per cent on one-year bank deposits.
Falling bond yields are prompting money managers to buy riskier debt with no set maturities to boost returns as inflation erodes the value of fixed-income assets. Singapore government bonds, rated AAA, yielded 1.35 per cent on Aug 29, versus 1.83 per cent average in 2011 and were as high as 3.47 per cent before the onset of 2008 global financial crisis.
Investors in Singapore local-currency corporate bonds earned 4.1 per cent this year, according to HSBC Holdings, compared with 3 per cent on local government securities.
United States investment-grade company debt rose 7.7 per cent, according to Bank of America. Central banks in the US, Japan and Europe have cut benchmark policy rates to near zero to spur lending and economic growth.
Two-year government bonds yielded 0.22 per cent in Singapore, 0.27 per cent in the US, 0.1 per cent in Japan and below-zero in Germany.
The United SGD Fund was ranked the top local-currency bond fund in 2010 and 2011 by Lipper based on three- and five-year performance. BLOOMBERG
TODAYonline | Business | UOB fund return trumps peers
The full article is: UOB Fund Beats Peers With Perpetual Debt: Southeast Asia - Businessweek Above bold text are my emphasis.
The S$435-million United SGD Fund managed by the unit of United Overseas Bank counts seven perpetual bonds among about 50 securities in its portfolio as of June 30, including Westpac Banking's debt, according to the fund's semi-annual report.
The manager also bought floating-rate notes sold by Standard Chartered and Korea First Bank maturing in 2018 and 2034, respectively.
"We want to diversify across countries, sectors and structures, and perpetual bonds are an added spice to dish," said Ms Joyce Tan, co-head of Asian fixed-income investment at UOB Asset Management.
"It's still a short-term bond fund."
Ms Tan oversees a team of 20 credit analysts and scours the region for 70 per cent of investment denominated in foreign- currency bonds. Those assets are fully hedged, covering investors against currency risk, she said.
"The euro-dollar market offers better risk-adjusted return in terms of better liquidity, wider choices and compelling valuations. The bonds are commonly rated and the issuers have longer track records."
The picks helped the plan return 5.1 per cent this year through Aug 29, topping 76 per cent of rivals including investment vehicles managed by Fullerton Fund Management and Nikko Asset Management, data compiled by Bloomberg show.
That outpaced the city's 4.9 per cent average inflation this year and compares with the 0.26 per cent bid-rate on the six-month Singapore interbank offered rate and 0.5 per cent on one-year bank deposits.
Falling bond yields are prompting money managers to buy riskier debt with no set maturities to boost returns as inflation erodes the value of fixed-income assets. Singapore government bonds, rated AAA, yielded 1.35 per cent on Aug 29, versus 1.83 per cent average in 2011 and were as high as 3.47 per cent before the onset of 2008 global financial crisis.
Investors in Singapore local-currency corporate bonds earned 4.1 per cent this year, according to HSBC Holdings, compared with 3 per cent on local government securities.
United States investment-grade company debt rose 7.7 per cent, according to Bank of America. Central banks in the US, Japan and Europe have cut benchmark policy rates to near zero to spur lending and economic growth.
Two-year government bonds yielded 0.22 per cent in Singapore, 0.27 per cent in the US, 0.1 per cent in Japan and below-zero in Germany.
The United SGD Fund was ranked the top local-currency bond fund in 2010 and 2011 by Lipper based on three- and five-year performance. BLOOMBERG
TODAYonline | Business | UOB fund return trumps peers
The full article is: UOB Fund Beats Peers With Perpetual Debt: Southeast Asia - Businessweek Above bold text are my emphasis.
