WHAT WE'RE UP TO
Et tu, bond funds? With the stock markets falling, investors will be looking to their bond funds to provide stability in their portfolios. But not all bond funds have delivered.
All but the tiniest bond funds in the Canadian fixed income, Canadian short- and long-term fixed income and high-yield fixed income categories have been ranked according to their returns for the year through Nov. 4. We've also thrown in year-to-date and three-year quartile data, to show how funds rank against their peers. Quartiles divide funds in a category into four groups according to their returns. First quartile is best, fourth is worst.
SO WHAT DID WE TURN UP?
Lots of bleeding bond funds, especially in the high-yield category. You may know high-yield bonds by their nickname, which is junk bonds. These bonds are issued by companies with lower-tier credit ratings that must offer premium interest rates to attract investors. Alongside these higher returns comes higher risk, and that explains why high-yield bonds have fallen sharply in value lately. With the global financial system still in delicate shape, investors are in no mood for extra risk.
Our top loser is TD High Yield Income, which is also the most popular high-yield bond fund in Canada. Among the top holdings of this fund as of its most recent report to Globefund.com were bonds issued by Domtar and Cascades, both of which are in the struggling forest products sector, and Nortel Networks, which needs no introduction as a troubled company.
A few long-term bond funds also made our list. These funds typically hold bonds that mature in 10 years or more, and they're substantially more volatile than conventional bond funds, which generally focus on shorter-term bonds. Long-term bonds offer somewhat higher returns, but they may be too twitchy for investors seeking a low-stress place to put some money.
Real-return bonds, which offer protection against inflation, have also been weak in the recent days. Real-return bonds had a nice little rally going as inflation fears grew late last year and into 2008. Now, with deflation more of an immediate concern than inflation, real-return bonds have lost some appeal.
As for traditional Canadian bond funds, they have done okay this year. The real stars of the broad bond category: global bond funds.
Worst-performing bond funds
Preliminary returns as of Oct. 2008)
|Last||% return||(as of Oct. 2008)|
|Net Assets ('000)||reported||(as of||YTD||3-yr %||3-yr|
|Fund name||Category||as of Sep '08||MER Date||MER||Nov. 4)||Quartile||return||Quartile|
|TD High Yield Income||High Yield Fixed Income||1,165,548||10/31/2008||1.89||-27.8||4||-7.7||4|
|Desjardins NthWest Sp Glbl HY Bd-A||High Yield Fixed Income||108,949||5/30/2008||2.13||-24.1||4|
|Northwest Spec Globl High Yld Bd||High Yield Fixed Income||35,731||5/30/2008||2.12||-24.1||4||-7.1||4|
|Altamira High Yield Bond||High Yield Fixed Income||12,803||9/30/2008||2.20||-23.9||4||-6.1||4|
|National Bank High Yield Bond||High Yield Fixed Income||72,079||9/30/2008||1.90||-22.5||4||-5.5||4|
|Northwest Specialty High Yield Bd||High Yield Fixed Income||168,582||5/30/2008||2.07||-21.3||4||-3.7||3|
|Trimark Global High Yield Bond||High Yield Fixed Income||127,845||9/30/2008||1.75||-21.2||4||-6.5||4|
|BMO Global High Yield Bond||High Yield Fixed Income||17,317||9/28/2007||2.10||-20.4||4||-7.8||4|
|BMO Guardian High Yield Bd Fd-M||High Yield Fixed Income||402,934||5/30/2008||2.10||-18.6||3||-6.2||4|
|Renaissance Cdn High Yield Bond||High Yield Fixed Income||185,752||4/30/2008||1.91||-16.5||3||-2.0||2|
|Trimark Advantage Bond||High Yield Fixed Income||540,204||9/30/2008||1.24||-16.0||3||-4.0||3|
|RBC Global High Yield-A||High Yield Fixed Income||178,653||6/30/2008||1.70||-14.3||3||-1.6||2|
|Mackenzie Sentinel Corporate Bond||High Yield Fixed Income||538,918||6/30/2008||1.62||-12.4||2||-1.2||1|
|Brandes Corporate Focus Bond||High Yield Fixed Income||25,642||9/30/2008||1.42||-11.7||1|
|Beutel Goodman Long Term Bond||Cdn Long Term Fixed Incm||167,440||10/31/2008||0.71||-10.2||4||0.0||4|
|Standard Life Corp HighYield Bd-A||High Yield Fixed Income||46,225||10/31/2008||2.14||-9.8||2||-2.2||3|
|Dynamic High Yield Bond||High Yield Fixed Income||290,885||6/29/2007||2.28||-9.7||2||-0.9||1|
|Manulife Corporate Bond Fund||High Yield Fixed Income||375,414||12/31/2007||1.68||-8.7||1||-1.3||2|
|Steadyhand Income||Cdn Fixed Income||11,080||-8.4||4|
|Altamira Long Term Bond||Cdn Long Term Fixed Incm||183,546||9/30/2008||1.57||-8.1||4||-0.4||4|
|AGF Canadian High Yield Bond||High Yield Fixed Income||210,259||9/30/2008||1.88||-8.0||1||0.5||1|
|TD Corporate Bond Capital Yield-I||Cdn Fixed Income||139,406||10/31/2008||1.58||-7.1||4|
|Desjardins Enhanced Bond||Cdn Fixed Income||1,705,001||5/30/2008||1.69||-7.1||4||-0.4||4|
|iShares CDN Long Term Bond Index||Cdn Long Term Fixed Incm||36,882||10/31/2008||0.35||-6.7||4|
|CI Signature Corporate Bond||High Yield Fixed Income||766,520||9/30/2008||2.30||-6.6||1||-0.5||1|
|Dynamic Real Return Bond||Cdn Inflation Protctd Fxd Inc||50,414||6/29/2007||1.80||-6.4||4||-2.7||4|
|Sarbit Real Return Bond Trust||Cdn Inflation Protctd Fxd Inc||12/31/2007||1.34||-6.2||2|
|SEI Real Return Bond-O||Cdn Inflation Protctd Fxd Inc||225,290||10/31/2008||0.15||-6.1||3||-1.6||1|
|Altamira Inflation-Adjusted Bond||Cdn Inflation Protctd Fxd Inc||4,134||9/30/2008||2.03||-6.1||3||-2.6||3|
|AGF Global High Yield Bond||High Yield Fixed Income||101,373||9/30/2008||1.89||-5.9||1||0.3||1|
© 2007 The Globe and Mail. All rights reserved.
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