Fund in Focus: NEI Global Total Return Bond Fund

Low volatility global bond offering

Launched in September 2013, the NEI Global Total Return Bond Fund is sub-advised by Paris-based Amundi Asset Management. It focuses primarily on investment-grade bonds around the world, in both developed and emerging markets, with the goal of balancing returns with potential risk.

Risk-management tools include duration management, country and yield curve positioning, sovereign bonds, and credit allocations, as the fund blends top-down macro analysis with bottom-up security selection, also incorporating socially responsible investing criteria.

Their top-down macro analysis takes a directional and relative value view on government and corporate bond issues, helping the managers zero in on the best opportunities and create a model portfolio. The bottom-up security selection process looks for bonds or derivatives that will provide what they believe to be the most effective exposure based on their model.

As of Sept. 30, about 53% of the portfolio was weighted to government bonds, with corporates at 38% (including about 12% in high-yield issues). At Sept. 30, about 45% of the portfolio was invested in North America and 44% in Europe, making this a truly global option.

Over the past three years to Sept. 30, the fund posted a modest average annual compounded rate of return of 1.3%, as rising yields through 2018 have acted as headwinds. In calendar 2017, however, the fund gained 4.31%, outstripping benchmarks, and its 5-year average annual compounded rate of return to Sept. 30 was 2.6%.

The fund’s volatility profile is well below the broader markets and peer group, and it has done an excellent job protecting capital in down markets. For the three years ending Sept. 30, it participated in less than 10% of the downside of the Bloomberg Barclays Global Aggregate Index.

This fund is shaping up to be a lower-volatility way to play global bonds. It provides exposure across a wide range of geographic sectors and credit qualities. While not my favourite fund at the moment, it is one certainly worth keeping an eye on.

NEI Global Total Return Bond Fund
Fund company: NEI Investments
Fund Type: Global Fixed Income
FundGrade Rating: B (September)
Style: Top-down macro, Bottom-up security selection
Risk level: Low
Load status: Optional
RRSP/RRIF suitability: Good
Managers: Laurent Crosnier since Apr 2014, Myles Bradshaw since May 2015
MER: 2.13%
Fund code: NWT194 (Front-end load)
Minimum investment: $500

Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due diligence on a variety of investment products. He is also the publisher of Dave Paterson’s Top Funds Report, offering regular commentary and in-depth analysis of Canada’s top investment funds. He uses a unique analytical approach to identify funds with strong, risk-adjusted returns, and regularly publishes his insights and analyses in Fund Library.

Notes and Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.