Morningstar has rated Australian and global fixed income funds and has given PIMCO’s Australia Bond a gold rating, the highest possible analyst accolade.
The ratings agency issued 15 silver ratings, 14 bronze and one negative rating to an exchange traded fund (ETF) for the Russell Australian Select Corporate Bond ETF, as it offered little compensation for risk.
Silver ratings were issued to Bentham Global Income, BlackRock Indexed Australian Bond, Franklin Templeton Multi-sector Bond, Henderson Australian Fixed Interest, Henderson Tactical Income, iShares Core Composite Bond AU (ETF), Legg Mason Brandywine Global Opportunistic Fixed Income, Macquarie Income Opportunities, Schroder Fixed income, three PIMCO funds and three Vanguard funds.
Four new bond funds were added to their Morningstar’s rating lists, and they stopped covering two funds: the AMP Capital Enhanced Yield, as it was returning capital to unit holders, and BlackRock’s Monthly Income, as it dwindled down in size and no longer met Morningstar’s criteria.
The funds they added included: BNY Mellon Standish Global Bond (rated neutral), Colchester Global Government Bond (rated bronze), Legg Mason Brandywine Global Opportunist Fixed Income (siliver) and T.Rowe Price Dynamic Global Bond (neutral).
The research house said Australia’s major fixed income benchmarks had lengthened in duration and more foreign entities were issuing bonds in Australian dollars.
Some funds managers were investing outside the index as they searched for yield wherever they could find it, Morningstar said.
“Investors and advisers should take care to avoid abandoning a long-held investment strategy at the wrong moment. In the current low rate environment, rather than reaching too far for yield, investors should temper their return expectation, not just for bonds but for equities and other asset classes as well,” Morningstar said.
