Fidelity Global Multi Asset Income Fund

George Efstathopoulos is one of the key fund managers that co-managed several strategies including a multi-asset fund that beat 99% of peers over the last year.

What had he done?  He jumped into Chinese securities when many of his peers jumped ship last year, now he is ready to buy more with junk bonds over equities his conviction for 2019.

The chart below showed that Chinese junk bonds have outperformed EM peers since mid-july.

Asia junk bonds now made up about 10% of Fidelity’s flagship Global Multi-Asset Income Strategy Fund, and Estathopoulos is ready to ratchet up holdings to 15%.

Efstathopoulos prefers Chinese corporate bonds over equities for their better risk-reward ratio. “With credit, you don’t need the market to agree with you — there’s a maturity and either the bonds default, or they don’t,” he said. “Even if there are some defaults you’re getting paid for the risk you’re taking.”

He is also bullish on Chinese government bonds, which make up over 2% of his defensive basket and were the biggest winner last year among 34 sovereign markets tracked by Bloomberg.

He expects one to two hikes in 2019 and see the Fed to be more data dependent.  He believed that US growth is “finally coming closer to meeting the rest of the world’s and as such would expect the slow down to be a headwind for the dollar.

He has been adding risk in emerging markets, more so after the correction in oil prices.

Reference:

Bloomberg, Ruth Carson & Masaki Kondo, 2019-01-26, “China Junk Bonds Not Stocks is Fidelity’s Trade War Strategy”