Dollar-denominated assets will continue to offer favorable yields as the US Federal Reserve keep monetary policy tight and U.S. interest rates expected to peak this year.
Asia United Bank (AUB) Senior Vice President and Head of Trust Andrew Chua made the statement after accepting the “Best Managed Fund” in the Dollar Medium-Term Bond Fund category for the AUB Gold Dollar Fund (GDF) at the CFA Society Philippines’ 2023 Best Managed Funds of the Year Awards held on August 10. A total of 86 funds from 16 investment houses and trust institutions joined the competition.
AUB was able to sustain its seventh-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 end-June 2023, the Fund had a year-to-date absolute net return of 4.90 percent, equivalent to an annualized return of 9.75 percent net, outperforming the benchmark’s performance of 2.95 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It offers flexibility as returns can be withdrawn any time after the minimum holding period and investors benefit from a team of professional fund managers that will ensure their investments are kept safe as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,” Chua said.
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.
Growing business volume, higher net interest margin, and better non-interest income enabled AUB and its three subsidiaries to post P4.1 billion in consolidated net income in the first half of 2023 versus the same period a year ago. The 42 percent year-on-year (YOY) growth is among the highest so far reported among the country’s publicly listed privately owned universal banks.
The first-half income translated to higher profitability ratios, with Return on Equity (ROE) at 20.3 percent and Return on Assets (ROA) at 2.6 percent.
The group’s total operating income for the first half rose 30 percent YOY to P8.9 billion.
This was on the back of a 28 percent increase in net interest income to P7.4 billion attributable to business volume growth and increased yields. Non-interest income rose 41 percent to P1.5 billion.
