Government bonds were one of the only reliable portfolio diversification instruments when stock markets crashed earlier this year, but they now face several pressing questions. Are they too expensive and will they still work on the next massive sale? What future for bonds more generally?
Mike Riddell, manager of the Allianz Strategic Bond fund, has successfully weathered recent bouts of volatility by taking a flexible approach to fixed income. In this interview, he tells us what the future might hold for the asset class and where he sees value (and risk).
The discussion revolves around some of the big issues facing bond investors. A more in-depth analysis of Mr. Riddell’s fund and his recent activity is available here.
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“Hunt the natural rate”
The natural rate can be defined as the real interest rate at which output is at its potential level and inflation is stable. Right now, central banks want real rates to be lower than this rate, in order to stimulate output and increase inflation. Hence the question: what is the natural rate?
Click here to read the full story from Resident Economist Chris Dillow
Many investor portfolios should have an allocation to assets other than stocks for diversification. And with spot rates so low, bonds can be a useful item in income portfolios.
Click here to read IC’s selection of bonds in the Top 100 Funds