The alternative to bonds in a rising rate environment

Hedge funds

Risk-averse investors could target absolute returns by diversifying across hedge fund strategies , writes Fred Ingham, managing director at Neuberger Berman Alternative Investment Management.

Soaring bond yields seen through the mid and latter parts of 2013 were particularly painful for long-only fixed income investors with long duration portfolios. On 2 May 2013, the ten-year Treasury yield reached its year-to-date low of 1.63% and, in just six short weeks, the yield increased by 60%, hitting 2.61% on 25 June 2013. Ten weeks later, by 5 September 2013, yields hit 2.98%, before topping 3% at year end. Although rates have fallen back somewhat today, this is likely to be only a glimpse of what is to come. Given the Federal Reserve’s stated intention to begin normalising i...