“As an active manager, what you want is volatility. And my goodness, Trump brings volatility,” said David Roberts, fixed income fund manager at Nedgroup Investments, as he evaluated the latest opportunities in the fixed income market.
Roberts and his fellow guests on the FT Adviser podcast, David Coombs, head of multi asset investing at Rathbones Asset Management, and Paul Angell, head of investment research at AJ Bell, agreed opportunity was rife in fixed income right now.
That is not just because of the new US President Donald Trump and his quick fire radical policies, but also because of wider concerns around inflation and economic growth at home and abroad.
Roberts said: “We think the opportunities for that value-driven inflation-beating investment are as good for most investors as they have been for at least a decade.”
Coombs agreed and said fixed income had a greater role to play in his multi-asset portfolios today than it did in the past 10 years.
We think you’re paid for owning sovereign bonds.
“We see inflation-plus returns on offer from various types of fixed income markets,” he noted.
Coombs said fixed income has not been a good diversifier in recent years but right now sovereign bond markets were the most attractive on a risk-adjusted return basis and also from a diversification perspective.
“We think you’re paid for owning sovereign bonds. We’ve taken all our investment grade and high yield and emerging debt out,” he said.
But Angell said he has opted for increasing cash in his low-risk portfolios, aware of the ongoing inflation risk.
“We continue to think that certain parts of the inflation prints are proving sticky, some of the core inflation numbers. So for our lower risk investors we’re just thinking, do you know what, we’ll sit in cash rather than government bonds for now, or at least up our cash versus our government bonds on that basis.”
Coombs said he saw an opportunity in being overweight duration but agreed with Angell, “having some cash as well is useful in the multi-asset fund right now, because every Trump Monday there’s something coming out that’s volatile, [and] you want to have some cash ready to take advantage of that volatility.
“You have to be very active right now,” he added.
Roberts agreed there has been “quite significant volatility” in the market ever since it became clear Trump could become the next president.
“So that’s given us opportunity to take advantage of that . . . When we see the market sell off, when prices fall, then as active managers that gives us the opportunity to add and hopefully capture some additional alpha from the market.”
To hear more about the managers’ diversification strategies and where they see the biggest opportunities in the market, click on the link above.
carmen.reichman@ft.com
