IG funds resilient to current volatility, says Fitch

European investment grade (IG) credit funds have shown resilience in the current market volatility, and offered returns of 5.2% to end of April 2012, according to research published by Fitch Ratings.

IG corporate bonds were seen as a relatively safe haven, and these funds outperformed equity by 11.2% over the period December 2010 to April 2012, reflecting generally strong underlying corporate balance sheets and spread tightening.

In 2012, high yield funds outperformed IG funds by 3.6%. By contrast, IG corporate credit funds performed better in 2011, outperforming high yield funds by 3.5%.
During the first quarter, inflows for credit funds was around €8.3bn.

“Funds that performed well through the financial crisis have not performed well after the crisis, and vice-versa. This highlights different risk profiles and the inability or unwillingness to manage market exposure dynamically. Understanding a manager’s style and a fund’s detrimental or favourable market regimes remain key factors for investors,” Fitch said.

At the end of the quarter, IG corporate credit fund assets under management were around €200bn and high yield were about €35bn, evenly split between euro denominated or hedged funds and sterling funds.

The total number of credit focused funds in Europe was just over 600 at end April 2012, with the ten largest funds accounting for around a third of total credit fund assets under management, Fitch said.


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