Bond ETFs Outperform Peers as Equity Funds Take Hit

Business & Markets Desk
Bond ETFs Outperform Peers as Equity Funds Take Hit
Bond ETFs Outperform Peers as Equity Funds Take Hit

The first quarter of the current Iranian year (started March 20) was tough for investors. Political fears, poor corporate earnings and a slowing global economy gave equity investors a beating.

Flight from stocks created demand for fixed income securities that have been in short supply. But bond yields also dropped during the quarter as central bank pressure got banks to cut their one-year deposit rates.

A look at the performance of the short list of Iranian Exchange-Traded Funds shows the downtrend in Tehran's markets. Of the 15 ETFs surveyed by Parsian Lotus Investment Bank, only three made money—all of whom only invest in bonds. It excluded two other ETFs from its study, as they were formed during the quarter. The data for the report came from Financial Information Processing of Iran.

The 15 ETFs on average lost 3.86% during the quarter, fairly better than the losses of the two equity exchanges in Tehran. During the period, Tehran Stock Exchange shed a tenth of its size while the Iran Fara Bourse over-the-counter market declined 5.9%, the websites of TSE and IFB show.

But the average is slanted from the returns of the three bond ETFs that enriched investors 5.48% on average during the period.

Etemad Afarin was the top performer with a 5.89% return, followed closely by Arman Ati Kosar with 5.87% return. Ganjineh was the worst performing ETF gaining its investors 4.7%.

> Taken for a Ride

Other ETFs, including hybrid ETFs, were taken for a ride by stock markets every month of the quarter.

The index lost 2.2% in Farvardin, the first month of the Iranian year (started 20 March). TEDPIX's losses steepened as time progressed.

In Ordibehesht (ended May 20), TSE fell a further 2.7%. Losses in Khordad, the third month of the quarter, nearly equaled losses in the preceding two months combined.

TSE's benchmark lost 3,678 points or 4.8%, and ended the month at 72,614 points.

The tale was somewhat different on Iran Fara Bourse. While the TSE fell three months in a row, the IFB had a more volatile ride. Taking a cue from TSE, IFB's benchmark IFX lost 3.2% during the first month of the year.

However, the market rebounded in Ordibehesht, jumping nearly 5%, much to investor's relief. But the gains were not temporary. The market tanked 7.4% during Khordad, erasing gains from the preceding month.

> Best Performer Down 3%

Tracking the markets was the worst thing to do during the period. Index ETFs were the worst performing group. Kardan Investment Bank's index ETF lost 9.8% during the three months, ranking third from the bottom of the ETF file.

Turquoise Partners' index ETF, which tracks TSE's top 30 companies, lost 11.74%, nearly two percentage points more than the TEDPIX and the second worst performance among Iranian ETFs.

Turquoise is the premier seeker of foreign investment among Iranian financial-services groups.

But the worst performing ETF was Sepas, an equity ETF that plummeted 13.84%. The five other equity funds performed better, though they lost 5.7% of their investors' fortunes.

Aseman asset management's ETF, Asas, was the best performer, declining by just over 3%.

Returns of the four hybrid ETF, which invest in both stocks and bonds, were better. As a group, they lost 2.54%, but most of that came from Novin Investment Bank's ETF Sanovin. It was down 5.7% for the quarter. Meanwhile, Servat Afarin's assets remained nearly unchanged, making it the best performing hybrid ETF.