INVESTMENT STRATEGY
R
ECTOLE
S
PROFI
BOND
BOMBSHELL
With interest rate rises imminent, selecting the right fixed income fund for your needs can
be like navigating a minefield, writes Adam Lewis
W
ith choices to be made
regarding interest
rate risk, credit risk,
currencies and regions, not to
mention the debate thrown
up by the current tumultuous
geopolitical climate, investing in
fixed income is at best complex
and at worst a minefield.
There are four main fund-types
on offer – corporate bond, high
yield, strategic bond and gilts –
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and the key to negotiating this
minefield is focusing on which one
suits your objectives.
Gilts would rank as the safest
in normal market conditions,
followed by investment grade
corporate bonds, strategic bonds
and high yield.
However, as Tim Cockerill, head
of collectives at Rowan Dartington,
points out, we are not living in
normal market conditions. Six
years of record low interest rates
and low yields have challenged
the status quo, with the strong
performance of gilts catching out
many experts in the past couple of
years.
Yet Cockerill says rate rises are
coming. With this in mind, it is
worth considering the dynamics of
each of the main sectors and how
they are set to perform with an
inflection point on the horizon.
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