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Mutual Fund News

Global bond funds delivering impressive returns

rcarrick@globeandmail.com

WHAT WE'RE UP TO

A look at one of the few mutual fund sectors to deliver good results lately, global bond funds.

TODAY'S SEARCH

All global bond funds were rounded up and then ranked according to their year-to-date returns. Three-year returns were included as well to provide a longer-term perspective.

SO WHAT DID WE TURN UP?

An impressive showing from a type of fund that's largely invisible to most investors. Money has been made by the vast majority of funds in the sector, and some have delivered returns that investors haven't seen in many a year from bond funds of any type.

You'd expect bond funds to hold up well at a time when the stock markets are caught in a brutal downdraft, but Canadian bond funds have been only so-so in 2008. Global bond funds have outperformed for a couple of reasons, one of them being that they can hold bonds issued in countries where interest rates are higher. Another reason is this year's decline in the Canadian dollar.

Prior to 2008, the dollar had ridden a multiyear rally that offset gains produced by stocks and bonds denominated in the foreign currencies. Global bond funds were caught up in this, big time. Just check out how feeble the three-year returns are for many of the funds on our list. Go back further in time and the results are equally lame - the average global bond fund made just 1.1 per cent annually for the 10 years to Sept. 30.

Now, with the loonie losing some altitude, funds that invest in foreign stocks and bonds have been getting a lift. You won't notice this in U.S. and global equity funds because down markets overshadow everything. But in global bond funds, the loonie's weakness is a huge help.

How much of your portfolio should be in global bonds? An informal survey of half a dozen or so wrap accounts, basically funds that provide a balanced portfolio in a single product, found global bond weightings ranging from 3 to 22 per cent. The latter extreme includes both global government and corporate bonds.

Top global bond funds based on YTD return

Fund nameLast reported MER dateMERAs of Sept. 30, 2008: Net Assets ('000)As of Sept. 30, 2008: YTD % returnAs of Sept. 30, 2008: 3-year % returnMinimum investment
SEI Enhanced Global Bond-O9/30/20080.1984,55312.06%3.48%150,000
CIBC Global Bond Index8/29/20081.0360,3199.63%1.76%500
Altamira Global Bond9/30/20082.385,9148.30%0.36%1,000
Standard Life Int'l Bond-A9/30/20082.1222,2168.28%1.80%1,000
Scotia Global Bond7/31/20082.0219,5238.10%-0.39%500
Tmpltn Global Bond9/30/20082.0748,4447.95%4.61%500
United Global Fixed Income Pl-W9/30/20080.20114,4507.67%1.74%100,000
National Bank Global Bond9/30/20082.00287,3697.59%0.46%500
AGF Global Government Bond9/30/20081.90158,9647.24%0.69%500
Manulife Strategic Income Fund12/31/20072.12127,3847.09%500
CI Global Bond9/30/20082.02337,1286.32%0.72%500
TD Global Bond-I9/30/20082.15166,4876.05%-0.24%100
United Global Fixed Income CC-A9/30/20082.3433,5715.76%25,000
AIC Global Bond5/30/20081.9129,1844.93%1.08%250
Fidelity Global Bond-A9/28/20071.942,6404.04%500
AIC PPC Global Fixed Income Pool5/30/20082.1310,5943.13%250
GGOF Global Bond Fund Classic5/30/20081.483,6932.83%0.40%500
CIBC Global Bond8/29/20081.9464,5262.24%-1.66%500
QFM Fixed Income1.81%-0.11%2,500
Renaissance Global Bond4/30/20081.9511,0671.51%-1.69%500
DFA 5-Year Global Fixed Class A1.45%1.76%10,000
Mackenzie Sentinel Global Bond12/31/20072.0756,4031.30%0.18%500
RBC Global Bond6/30/20081.68904,7370.47%1.66%500
BMO World Bond9/28/20072.26352,0580.40%1.00%500
Dynamic Advantage Bond6/29/20071.6788,7870.05%500
Fonds Zéro coupon-profil Québec9/30/20081.8412,089-1.09%1.55%5,000
Fidelity Global Bond Currency Ntr-A9/28/20071.941,427-1.33%500
Frk Tmp Glob Agg Bond-A9/30/20081.585,709-1.52%500
Manulife Canadian Bond Plus Fund12/31/20071.9590,217-2.41%500
FrontierAlt Opportunistic Bond A8,597-3.30%500

© 2007 The Globe and Mail. All rights reserved.

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