Standard Bank US Dollar Bond comment - Jun 2003 - Fund Manager Comment20 Aug 2003
The fund invests predominantly in the Fidelity US Dollar Bond Fund, which generated a positive dollar return during the quarter of 3.2%.
However, the continued strength of the rand (up 5.2% against the dollar) turned the positive dollar return of the fund into a small negative rand return.
The underlying Fidelity fund placed in the second quartile relative to competitor funds offshore for the quarter, six months and twelve months and top quartile over three and five years.
During the quarter, the fund performed broadly in line with the benchmark index, generating a return of 3.2% in US dollar terms.
Detractors from performance included an underweight exposure to the banking sector, which generated a return in excess of 6%, according to the Merrill Lynch series of indices.
Positive contributors to performance included an underweight exposure to agencies and a small exposure to non-investment grade securities. During the quarter, non-investment grade bonds were the best performing segment of the US fixed-income market, generating a return of 10%.
At the end of the quarter the fund had 55% of its assets invested in US Government bonds, 23% in government agency bonds and 16% in corporate bonds (industrial and financial), with 6% in other bonds such as lower rated bonds.
The fund's net yield at the end of the quarter was 1.35% and the fund had a modified duration of 5.6, which means that the fund's unit value will move by 5.6% in response to a 1% change in interest rates.
Standard Bank US Dollar Bond comment - March 2003 - Fund Manager Comment12 May 2003
The ever stronger rand (up 8.9% against the dollar) continued to weigh heavily on the fund 's unit price, which declined by a higher 9.7% because of an interest payment of 2.5% made during the period. In effect, the net decline in rands was 7.2% (9.7% less the 2.5% interest payment).In dollar terms the fund rose a net 1.4% during the quarter, somewhat better than the decline in shares.
In dollar terms corporate bonds have continued to perform well, despite the stock market 's decline. The spreads between corporate bonds and government bonds, which widened to multi year highs during the corporate scandals of 2002, have narrowed sharply, meaning that US corporate bonds (which dominate your portfolio) have outperformed government bonds of late.
Higher yielding corporate bonds have attracted good buying interest in the US because of the great dearth of yield in that country, where interest rates are at 40 year lows.