Investor demand for credit assets held up better than many expected last year amid record interest rate lows and continuing US-China trade tensions.

This increased focus on fixed income came as Australian investors continued to see savings rates fall towards zero, says John Likos, director of investment research at BondAdviser, which took over Morningstar's credit and hybrids research from mid-December.

"It’s hard to see credit continuing to rally as it has done for over 20 years now, although a continued low interest rate environment should continue to provide a supportive tailwind," Likos says.

Geopolitical risks and credit quality are among several challenges investors must heed this year, Likos says.

"With the large inflow of listed credit instruments on the ASX in 2019, it’s easy to assume they are often similar in risk, but they’re not," Likos says. "So, undertaking your due diligence is critical, particularly at this late stage of the credit cycle."

Bearing this in mind, fixed income-focused funds may appeal to investors seeking to mitigate some of the risks.

Global fixed income returned 7.2 per cent in 2019, as measured by the Barclays Capital Global Aggregate index. The following 10 global fixed income funds within Morningstar Australia's research stable beat this benchmark last year.

All but two of these, the Dimensional Global Bond trust and Advance International Fixed Interest Multi-blend, hold Morningstar Ratings of either Silver or Bronze Medal.

The Franklin Templeton strategy delivered a return of 9.77 per cent last year, the highest among its peers covered by Morningstar Australia. It ranks among the top-30 biggest Australian-domiciled global fixed income funds in Morningstar's database, with $180 million in assets under management - despite a net loss of $3 million of investor money through outflows during the year.

But as we've said before, outflows aren't necessarily a warning sign. The reasons can be as benign as an ageing investor base who are shifting to draw-down from accumulation as they retire.

Franklin Templeton holds a Morningstar Bronze Medal, and manager research analysts laud its consistent approach to finding undervalued real-yielding investments. Its portfolio team does this by considering medium-term macroeconomic conditions, quantitative forecasts for interest rates and currency prices, technical analysis, and other risk factors.

The fund's underlying assets are on average BBB-rated, and around 90 per cent are investment grade.

Legg Mason Brandywine Global Opportunistic Fixed Income fund ranks second in order of 2019 performance, its 9.73 per cent return for the year roughly in line with that of the Franklin Templeton strategy.

Morningstar senior manager research analyst Andrew Miles says the fund stands out from its peers, partly because of a focus on emerging market debt and currencies.

"The team focuses on sovereign debt, typically concentrating the portfolio in its top 15 country and currency ideas," Miles says. "A disciplined process and ample flexibility have been used effectively."

A low-cost index fund, the Vanguard International Credit Securities Hedged strategy, took third place in last year's performance rankings with a return of 9.65 per cent.

Vanguard’s low fee of 0.32 per cent, combined with its diversified portfolio of high-quality debt securities, underpin Morningstar's conviction in this Bronze Medal-rated fund.

Morningstar manager research analysts call out the passive management approach as a potential drag if bond yields rise.

But manager research director Tim Wong also notes that more expensive active managers are often reluctant to stray too far from the benchmark anyway: "the passive approach has paid off for Vanguard and the fund has delivered strong bear-market results ".

The average credit quality of the assets in Vanguard fund is BBB. These assets are almost entirely investment-grade.

Despite its neutral rating, Dimensional Global Bond Trust also turned in a solid performance last year, with an 8.82 per cent investment return.

Morningstar's Wong describes it as "deliberately conservative in sticking to plain-vanilla government, government-related and corporate bonds".

"While Dimensional avoids the risk of securitised bonds, it may also be a missed opportunity at times," he says.

Wong notes that performance has stayed reasonably close to the index since the fund launched in 2011. But Wong also points to worthy features including a low fee of 0.35 per cent and credentialled management team, which make the fund a "serviceable" choice as a core part of an investment portfolio.

Finally, Legg Mason Western Asset Global Bond – the second Legg Mason strategy in this list – delivered a return of 8.61 per cent in 2019.

Holding a Morningstar Bronze Medal, the fund launched locally at the start of 2017, but has been run offshore by the same team for a decade.

The team selects securities using a relatively simple but disciplined approach, investing across government bonds, credit, mortgage-backed and asset-backed securities and emerging-markets debt. Almost all the assets are investment grade, with just 2.7 per cent falling outside this category.

Morningstar manager research analysts believe the fund's considered approach and proven team bode well for the fund, and expect it to provide reliable long-term performance.