Dollar-denominated assets will continue to offer favorable yields as the US Federal Reserve keep monetary policy tight and US interest rates expected to peak this year.
Asia United Bank (AUB) Senior Vice President and Head of Trust Andrew Chua made the projection after the GDF was named the “Best Managed Fund” in the Dollar Medium-Term Bond Fund category at the CFA Society Philippines’ 2024 Best Managed Fund of the Year Awards held April 24. A total of 136 qualified funds from 17 investment houses and trust Institutions joined this year’s awards.
AUB was able to sustain its eighth-year winning streak due to the GDF’s consistently stellar performance.
The fund performed relatively well compared to the benchmark 5-year U.S. Treasury rates.
As of December 2023, the Fund had an annualized return of 7.47 percent net, outperforming the benchmark’s performance of 6.23 percent annualized return for the same period.
The GDF enables retail investors access to the US dollar bond market normally reserved for foreigners and high net worth investors. It offers fle xibility as returns can be withdrawn any time after the minimum holding period and investors benefit from a team of professional fund managers that will ensure their investments are kept safe as risk and returns are balanced appropriately.
The fund invests in a diversified portfolio of fixed income securities and targets to outperform a benchmark rate equivalent to the rolling yield of the 5-year US Treasury Notes, net of fees.
“With US interest rates expected to peak this year, the Fund will continue to benefit from the higher accruals on outstanding investments as a result of the higher interest rate environment and will potentially book gains on its marked-to-market with the tapering of interest rates by next year,” said Chua.
Local investors in search of higher-yielding assets will be well positioned if they load up on US dollar assets such as AUB’s GDF.
“Given the US Fed closing in on the end of the rate hiking cycle, the Fund will be gradually increasing its duration while maintaining safe and diversified securities as well as hold sufficient cash to manage liquidity risk,” Chua added.
