[Real Estate Finance] The More Interest Rates Drop, The More Exciting... Reliable Bond-Type Income Funds

[Asia Economy Reporter Eunmo Koo] As the novel coronavirus disease (COVID-19) spreads and volatility in global stock markets rises higher than ever, income funds that diversify investments across various bonds worldwide have shown relatively stable performance.

According to fund rating agency FnGuide on the 16th, as of the 12th, KB Asset Management's 'KB PIMCO Global Income Selection Securities Investment Trust' recorded a 9.88% return over the past year based on the bond-sub fund A class, showing the best performance among domestic public income funds.

During the same period, funds such as 'Korea Investment TIF Lifetime Income Securities Investment Trust (Bond-Sub Fund) (C-F)' (9.61%), 'Samsung PGI Hybrid Income Securities Investment Trust H [Bond Mixed-Sub Fund] A' (9.43%), and 'Korea Investment TIF Lifetime Income Securities Investment Trust (Bond-Sub Fund) (C-R)' (9.23%) also recorded nearly 10% annual returns, demonstrating the strength of income funds mainly investing in overseas bonds.

The most notable performer, KB PIMCO Global Income Fund, is a fund that seeks income (interest earnings) by diversifying investments across various high-yield bond funds managed by the global bond manager PIMCO. The management company stated, "Income funds that consistently pursue income despite interest rate fluctuations, diversified income funds, global bond funds that respond according to interest rate and inflation outlooks, and global real return funds utilize PIMCO's bond funds to actively respond according to investment conditions."

As volatility and uncertainty in domestic and international stock markets continue to expand daily due to the COVID-19 situation, the appeal of bond-related products, which are safe assets, is increasing compared to stock-related products, which are risky assets. Fund manager Hyungjun Joo of KB Asset Management explained, "Due to the impact of the COVID-19 situation, countries are implementing large-scale economic stimulus policies, increasing stimulus budgets, and lowering benchmark interest rates. Accordingly, interest rates are likely to decline somewhat for the time being, which will positively affect bond-related investments."

Income-type funds investing in bonds have lower volatility compared to stock-related products. In the current situation where market volatility is increasing, investing in only one asset makes it difficult to achieve stable returns. Therefore, income funds that invest in real asset bonds such as infrastructure and real estate to cope with interest rate volatility are worth considering for investors seeking stable performance.

However, it should be noted that bond-type income funds' performance can also vary depending on the bond market trends. The fund manager advised, "Generally, bond-type funds tend to perform better during periods of declining interest rates and somewhat underperform during periods of rising interest rates."

This content was produced with the assistance of AI translation services.