Amova Short Term Bond Fund: A step up from cash, without reaching too far

• Amova Short Term Bond Fund offers a defensive step up from cash through diversified short-duration bond exposure.
• The fund prioritises credit quality and diversification, rather than maximising yield at all costs.
• Its short-duration approach and avoidance of perpetuals help reduce sensitivity to interest-rate volatility.
• The portfolio remains diversified across geographies, sectors and issuers, with financials and Australia as key exposures.
• The fund has delivered steady long-term returns, with relatively low drawdowns versus short-duration bond peers.

Cash and money market funds have served investors well over the past few years, especially after the Fed’s 2022 rate hikes lifted yields across cash-like products. Since then, domestic SGD rates (proxied by SORA) have fallen to around the 1% - 2% range (Chart 1), but still provide a solid base for SGD fixed income returns.

Short-duration bond funds can play a useful role in your portfolio, sitting between cash-like products and traditional bond funds. These invest in a broader range of short-term bonds versus money market funds, while carrying lower duration risk than longer-maturity bond funds. This allows them to seek higher yields while maintaining a relatively high-quality and defensive profile.

In this article, we take a closer look at the Amova Short Term Bond Fund. This fund has been a consistent winner on our Recommended Funds list, appearing 16 times in total, including each of the last 15 consecutive years from 2011 – 2025. We think this is one of the most consistent options for investors seeking defensive SGD bond-like returns.

Chart 1: SGD rates rose alongside Fed hikes, but have since fallen back to 1% - 2%

About the Amova fund: A defensive short-duration strategy

The Amova Short Term Bond Fund seeks to preserve capital and liquidity while outperforming the 3-month Singapore Overnight Rate Average (SORA). It primarily invests in a diversified portfolio of good-quality, short-term bonds and money market instruments. In simpler terms, the fund is designed to remain defensive in nature, while aiming to provide slightly higher returns than cash-like instruments.

Investment process: Credit quality and diversification over yield

Conservative investment philosophy

A defining characteristic of the fund is its conservative investment philosophy. The strategy is managed with a focus on credit quality and diversification, and is not designed to maximise yield at all costs. Its philosophy has three key principles: (i) capital preservation; (ii) long-term fundamentals-driven investing; and (iii) value discipline.

The investment process combines proprietary top-down macro assessment with bottom-up credit research. Top-down views help shape decisions on duration, yield-curve positioning, country allocation and sector exposure. Bottom-up credit research is then used to assess individual issuers and securities to identify good-quality short-term bonds that can contribute to returns without taking excessive credit risk.

Consistent short-duration approach to investing

Duration management is key, as expected of a short-duration bond fund. The portfolio’s average duration is typically kept under 3 years, and recent duration has generally stayed around the 1 – 2 year range. The fund adopts a laddered maturity approach, with its portfolio spread across different maturities – this helps to smooth out the effects of interest rate fluctuations.

The fund also avoids perpetual and undated bonds. While such bonds may have near-term call and/or reset dates, calls are typically at the discretion of the issuer rather than the bondholder. During periods of stress, issuers may opt not to call such bonds, causing them to behave more like longer-duration credit instruments. Avoiding these securities therefore helps the fund preserve its short-duration character even in more challenging market environments.

Active currency & risk management

Currency management is another important part of the strategy. The fund invests across multiple currencies beyond SGD, partly because the domestic SGD bond market is small in size. This allows the manager to access attractive opportunities which may be found only in other bond markets (e.g. Australia and Europe). In some situations, it may also allow the fund to earn incremental yield after hedging to SGD. In any case, almost all non-SGD positions are hedged back to SGD – the fund does not take significant FX bets, in line with its SORA benchmark and its conservative mandate.

Risk control is also embedded in the investment process. The manager monitors its holdings on an ongoing basis and applies sell discipline when fundamentals deteriorate or spreads are expected to widen. Amova also uses early risk-screening indicators, such as credit default swap spread volatility and share price movements, to identify potential areas of risk.

Latest holdings & breakdown

Its holdings are diversified across geographies, which is expected given its mandate to invest beyond Singapore and SGD credits (Chart 2). Over the past few months, its largest geographical exposures were to Australia (30+%) and Hong Kong (15+%). The sizeable exposure to Australia reflects the manager’s view that spreads and yields broadly remain attractive there, and includes higher allocations to AUD-denominated floating-rate notes, possibly also reflecting their rate expectations from the RBA.

Its sector exposure is led by Financials, which is also unsurprising for this strategy (Chart 3). Banks and insurers are frequent issuers in the bond market given their funding and regulatory capital needs, creating a wider range of opportunities for Amova’s team to choose from. Amova has also stated that banks offer a yield pickup over similarly rated corporates, which is in line with our own observation, especially for Tier 2 capital instruments.

The top 10 holdings accounted for 16% of the portfolio, with each of the top holdings ranging from 1.5% to 1.9%, suggesting decent bond diversification (Table 1). These top holdings are also diversified across sectors and currencies.

Chart 2: Geographically diversified with the largest exposure to Australia

Chart 3: Exposure led by different types of Financials, especially Banks

Table 1: Top 10 holdings are diversified

Short duration with diversified credit exposure

Latest portfolio positioning (as of May 2026)

As of 31 May 2026, the Amova Short Term Bond Fund had a fund size of around $1,196m. The fund held a diversified portfolio of 184 securities, with a weighted average yield to maturity of 4.60% (unhedged), weighted average duration of 1.81 years, and average credit rating of BBB+ (Table 2).

The fund’s average weighted YTM is currently about 4.60%. However, investors should note that this is an unhedged figure. Given the fund’s sizeable allocation to AUD and other non-SGD bonds, we expect the SGD-hedged yield to be lower, closer to the 2+% mark. Even so, the fund should still offer a meaningful step up from cash-like yields, while maintaining a defensive short-duration profile.

Its average duration was around 1.81 years. This is consistent with the fund’s short-duration mandate and historical track record of generally keeping duration within the 1 – 2 year mark.

Finally, its average credit rating was BBB+ as of 31 May. This is again consistent with the fund’s high-quality mandate and its track record of maintaining an average portfolio rating around BBB+ to A-.

Table 2: Key fund metrics

Outlook: Carry with limited duration exposure

Looking ahead, we expect fund returns to be primarily driven by carry and credit selection.

As we have expressed in recent articles, we believe there has been a turn in the interest rate cycle, and investors should not expect broad-based declines in interest rates. We do not rule out some volatility if yields continue to shift upward – an example is the fund’s modest -0.7% drawdown in March as yields spiked following the outbreak of the Middle East conflict. More importantly, the fund’s short-duration mandate is aligned with our research view, as it should help mitigate downside risks compared to typical bond funds.

Meanwhile, credit selection remains key, especially in today’s environment of tight spreads across different bond markets. With valuations already tight, particularly in shorter tenors, there may be limited room for further spread compression to drive returns. In today’s uncertain environment, avoiding weaker credits could be just as important as identifying attractive opportunities. Ultimately, the fund’s conservative approach and preference for high-quality credits should help support the fund’s track record of stability.

Track record: Slow and steady throughout market cycles

The fund has delivered a long-term track record since its inception in 2000 (25+ years ago), supported by its conservative approach and historically low drawdowns. There have only been 4 time periods with a drawdown of over 1%, all of which came alongside broad-based market declines (Chart 4).

• 2008 – 2009 Great Financial Crisis (GFC): The fund recorded its first drawdown of over 1% in September 2008, reaching a peak drawdown of 4.3% in January 2009. It recovered by Oct 2009, about 13 months after the initial shock.
• 2013 Taper Tantrum: The fund recorded a drawdown of -1.04% in June 2013, its highest since the GFC. Investors would have recovered from this drawdown by September 2013, around 4 months later.
• 2020 COVID: The fund recorded a drawdown of 2.3% in April 2020 over a period of about 1 month. It recovered these losses by August 2020, around 4 months later.
• 2022 Fed Rate Hikes: The fund recorded a drawdown of -3.1% in November 2022, over 14 months starting from September 2021. It recovered these losses by May 2023.

Compared to peers, its main edge lies in superior risk management and consistency, rather than large outperformance. Chart 5 shows the 10-year performance comparison with our other recommended short-duration fund and a composite of other short-duration funds on our platform. The relative consistency of the Amova fund (alongside United SGD Fund) is clear compared with the fund composite. This is expected given their conservative mandates, while some other short-duration funds may have higher exposure to high-yield bonds. Table 3 also shows the fund’s strong risk-management metrics, using drawdown and volatility as measures.

Chart 4: Performance since inception – very few experiences of drawdowns over 1%

Chart 5: Amova fund delivered slightly better performances, more importantly, with lower volatility

Table 3: Risk-return metrics of Amova fund vs peers

A practical short-duration fixed income strategy

The Amova Short Term Bond Fund is best suited for investors who wish to step modestly beyond cash without taking significant duration or credit risks. It may also suit investors who have excess cash beyond immediate liquidity needs and are willing to accept some NAV fluctuation in exchange for potentially higher returns. Overall, its short-duration profile, high average quality, and diversified portfolio make it a conservative short-duration solution within the fixed income space.

The fund is accessible to a broad range of investors in Singapore, including through Cash, SRS, CPF-OA, and CPF-SA. It is classified under the CPF Investment Scheme as ‘Low to Medium Risk’. It is available in three share classes (all accumulating): SGD, USD-H, and AUD-H.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.