A common theme for many multi-asset managers is to allow their bond exposure to perhaps be managed by fund managers who are able to quickly adjust their portfolios depending on the unravelling of events and, therefore, strategic bond funds where the manager has flexibility to invest as they see fit across the range of fixed interest opportunities available are currently popular.
Quantitative easing has been the biggest thing to happen in markets for decades. Its reduction is also going to be the largest thing to happen in decades. No one can say for certain how markets will react to its withdrawal and unwinding.
The fact is that central banks are, in effect, walking a tightrope with no safety net and the question investors might ask themselves is whether certain bonds have changed from being risk-free return to return-free risk and act accordingly.
Andy Gadd is head of research of Lighthouse Group
