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The 10 funds bearing the brunt of bond sell-off

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Over the past month losses have racked up across bond sectors after comments from the Federal Reserve signalling the end of quantitative easing spooked global markets.

Global bonds suffered their fourth-worst month in 20 years in May after Fed chairman Ben Bernanke said the central bank may slow the rate of its bond purchases if the unemployment rate continues to fall amid a strengthening of the economy.

Bernanke then rattled market sentiment further by stating there will be a reduction in QE in the third quarter of this year if the US economy continues to grow as expected.

Fears the market will no longer be supported by bond purchases led to a heavy sell off in US treasuries, with 10-year paper seeing yields jump from 1.75% to 2.42% over the past month, having hit a two year high earlier this week.

Gilts have also sold off, with the benchmark 10-year bond yield widening from 1.7% to 2.33%.

Major bond indices have fallen as a result, with the FTSE Gilts All Stocks index off 2.17% and the IBOXX sterling NonGilts index down 3.52% in the last month.

Over the same period every fund in the IMA Strategic Bond and IMA Corporate Bond sectors has posted a negative return (from May 21 to June 20, according to Morningstar data).

As expected, the picture is mixed, with some funds proving more resilient than others. M&G’s £15bn Optimal Income fund, run by Richard Wooolnough, is top of the sector after posting a marginal loss of -0.41% over the period.

In stark contrast a number of his peers in the IMA Strategic Bond sector have not been able to protect capital in falling markets as successfully.

Bottom of the pile is the PIMCO GIS Diversified Income fund, which has racked up losses of -6.49% over the month. Other big losers over the period include the likes of the SPI Strategic Investment Grade Bond fund (-4.74%), Old Mutual Monthly Income Bond (-4.4%), and the Templeton Strategic Bond (-4.32%) funds.

Below we reveal the five worst performing funds:

IMA £ Strategic Bond – bottom five performers over May 21-June 20

Fund name One month performance
 PIMCO GIS Diversified Income fund  -6.49%
 SPI Strategic Investment Grade Bond  -4.74%
 Old Mutual Monthly Income Bond  -4.4%
 Templeton Strategic Bond fund  -4.32%
 CF IM Bond  -4.28%
 Strategic Bond sector average  -2.8%


Meanwhile the IMA Corporate Bond fund sector performance has suffered sharper falls. The average fund has posted a negative return of -3.42%, compared to the IMA Strategic Bond sector average of -2.8%.

Bottom of the pile over the period is the Fidelity Institutional UK Long Corporate Bond fund (-5.27%), closely followed by the PIMCO GIS UK Long Term Corporate Bond (-5.23%) fund.

Below is the list of the five worst funds.

IMA £ Corporate Bond – bottom five performers over May 21-June 20 


Fund name  One month performance
 Fidelity Institutional UK Long Corporate Bond  -5.27%
 PIMCO GIS UK Long Term Corporate Bond  -5.23%
 Smith & Williamson Fixed Interest trust  -4.93%
 Henderson Institutional Long Dated Credit  -4.84%
 Schroder Institutional Long Dated Corp Bond  -4.74%

 Source: Morningstar

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