Global bond funds attract 88 billion baht, yield 0.50% return

Global bond funds have seen significant popularity over the past 18 months, drawing investments totalling 88 billion baht and yielding an average return of 0.50% for the year to date, according to Morningstar Research (Thailand).

Morningstar stated that global bond funds are capable of producing positive average returns this year, although these returns are modest in comparison to the US policy interest rate, which stands at 5.25-5.50%.

These funds have a policy to hedge against exchange rate risks, using contracts of nearly 3% based on the difference in policy interest rates between Thailand and the US as reported by the Thai unit of the US financial services company.

The research firm identified the top four funds delivering the highest returns, noting that these funds predominantly invest in short-term debt instruments. These investments have benefited from the rising interest rates in the US.

Eastspring Asset Management, boasting the largest asset size for global bond funds, commands a market share of approximately 23%. Following closely are Krungsri Asset Management and UOB Asset Management, both holding market shares slightly above 20%.

Investor concerns regarding the Federal Reserve’s policy direction persist. However, Morningstar highlighted that an interest rate hike does not invariably have a detrimental impact on the performance of debt funds.

Good returns

“Some funds may be diversified into various types of debt instruments that have the opportunity to generate good returns during periods of rising interest rates or high inflation, such as debt instruments with floating interest rates or those based on interest rates and inflation.”

Furthermore, certain funds may aim to enhance returns from the master fund by capitalising on anticipated currency movements in the market, Morningstar noted.

Investors should select funds appropriate for market conditions and their investment goals as advised by the firm.

The Thai global bond fund with the highest investment value this year is KF-CSINCOM, which holds 3.2 billion baht, followed by UOB UGIS at 3.1 billion baht.

In relation to Thai ESG (environmental, social and governance) funds, 30 such funds have been issued as of the first quarter of 2024. These funds collectively possess a net asset value of 6.6 billion baht and have produced an average return of -2.43%. During the same period, the average return of the Stock Exchange of Thailand index was -1.62%.

The Association of Investment Management Companies reported that Thai equity funds, including those focused on ESG, have experienced a negative return year to date of 2-3%, reported Bangkok Post.