SICO fixed income fund outperforms GCC peers in 2018

SICO, a leading regional asset manager, broker and investment bank, announced yesterday its Fixed Income Fund closed 2018 as the best-performing GCC Bond Fund. In what was a negative year for the majority of global and regional fixed income managers, the Fund still delivered a net positive return of 1.9 per cent, outperforming its benchmark, SICO said.

The Barclays GCC Bond Index made a late recovery in 2018, buoyed by a 50 basis point drop in US Treasuries in December to close the year with a return of 0.3pc. Since its inception in April 2013, the SICO Fixed Income Fund is up 23.2pc compared to 19.1pc by the index. Overall, the average yield of GCC paper rose to 4.65pc at the end of 2018 compared to 3.74pc at the beginning of the year. The spread, which measures an issuer’s credit risk, rose to 216 basis points from an average of 157 over the same time period.

The Fund’s positive performance amid emerging market headwinds — including four interest rate hikes, inverted yield curves, and increased political pressure throughout the GCC — underscores the strength of SICO’s forward-looking strategy and ability to preempt market volatility. “This performance is indicative of our ability to achieve positive returns within challenging market conditions,” said SICO CEO Najla Al Shirawi. Ali Marshad, Head of Asset Management Fixed Income at SICO attributes the positive performance of the Fund in 2018 to its short duration and high-yield strategy.

Commenting on SICO’s fixed-income strategy for 2019 Marshad said, “We plan to maintain our existing strategies with minor deviations to take advantage of this year’s inclusion in the JP Morgan EMBI Index. Overall, we are a bit more dovish going into the new year but increasingly tight spreads and inverted yield curves are forcing us to maintain our low duration and high yield strategy. There will however be pockets of opportunities and whoever gets these calls right will win this year.”

Marshad also noted that the team will continue to monitor yields on Oman after their recent downgrade along with the real estate sector in the GCC. “Oman is attracting interest after having overtaken Bahrain as the highest-yielding GCC sovereign, but the situation is likely to get worse before it gets better. Short-term bonds, however, seem safe and the announcement of a new issue might be a good entry point for anything longer. Similarly, the GCC real estate sector is now yielding nearly 10pc on short-term paper, which seems unfounded given cash balances and access to funding are still healthy,” he said.