Category Winner: Best Asia Bond Fund - PineBridge Asian Bond Fund - Provident Fund Units
Key Stats
Inception Date: 2012-02-10
Total Net Assets (Mil) (2019-02-28): USD 63.54
Manager: Arthur E. Lau
M: Morningstar P: PineBridge
M: Can you highlight any major changes you made to the portfolio over the course of 2018? Were there any particular holding(s) that drove the fund’s performance for the year?
P: Overall, we positioned relatively more defensively most of the time in 2018 given the weakening global and regional economic backdrop, heightened trade tension between US and China and continued tightening in financial conditions. The overweight in lower beta sectors and countries and underweight in marginal investment grade sectors such as China’s LGFV and potential fallen angle names benefited the portfolio. That said, we also reduced the defensive position in the latter part of 2018 given the outperformance in some sectors reached the targets. In a nutshell, in 2018, the theme was to avoid landmines and contained the beta of the portfolio.
M: What is your outlook for 2019 specific to the markets you cover, and how are you positioned to take advantage of opportunities and/or mitigate potential risks?
P: With a more benign trade rhetoric between US and China, an expected continued easing in China and a dovish interest rate view now for 2019, we think the strategies that have higher beta will benefit the current investment environment in near term. Nevertheless, supply risk and potentially continued weakening in economic activities may affect the overall risk sentiment and new trade policies may also impact different sectors in positive or negative ways. As such, we believe volatility will remain elevated and therefore trade positions will need to review more proactively and aggressively this year.
M: How have financial market risks, such as the ongoing trade war between the United States and China and tightening monetary policies in major economies, impacted your recent investment decisions? What are some underreported risks that could surface in 2019 or beyond?
P: There are some changes in the financial conditions globally and regionally from overly tighten to more neutral and potentially more accommodative. While we are not out of the woods yet, this has somewhat mitigated some concerns about this aspect. That said, economic conditions have yet to show signs of improving, which may affect the fundamental conditions of selective sectors. As alluded to above, any resolution in trade dispute between the US and China will affect different sectors in different ways. At the moment, we still expect the onshore credit default rate in China will continue to increase in view of ongoing deleveraging policy. Meanwhile, with somewhat more accommodative financial condition, we think sectors and sovereigns that underperformed in last year will benefit.
M: How is your investment team organized? Have there been any changes to the investment team or structure over the past year? Do you anticipate adding to the team in the near future?
P: As always, we continue to look for ways to strengthen our team’s capability and investment process. At the moment, we look to add a sovereign analyst position for the Asian region.
M: Where do you feel that the investment team or the investment process can be improved upon in the future?
P: We think 2019 is a year that requires more tactical allocation in sectors, countries or names because of elevated volatility. The collaboration and coordination between economic, political and credit analysis within Asia and outside Asia will become even more critical.
View all Morningstar Hong Kong Fund Awards 2019 articles here.
