Eclectica’s Hendry offloads gilts in Macro fund

Eclectica Asset Management’s Hugh Hendry has cut his exposure to gilts as yields have fallen to their lowest ever level in recent weeks.

At the end of September the hedge fund manager had around 47% of the NAV of his Eclectica Absolute Macro fund in long dated gilts, set to expire in 2040 and 2055, according to FE data.

However, over the past quarter Hendry has sold down his stake in UK government debt, and by the end of December had removed the positions from the portfolio.

The manager has used the proceeds to boost exposure to Australian government bonds, adding over 10% last month, to take total exposure to Australian paper to 45%.

The move comes amid a spike in demand for gilts from investors looking for safe havens as the eurozone crisis deepens.

The yield on the benchmark 10-year gilt fell below 2% in recent weeks, and has declined over 1% since the start of 2011.

Hendry's move out of gilts coincides with fears from a number of strategic bond managers that UK government debt is overvalued and is due a sharp correction.

As reported in this week's edition of Investment Week, the likes of M&G's bond manager Richard Woolnough and Thames River bond duo Peter Geikie-Cobb and Paul Thursbury have placed shorts on gilts in the past few weeks.

Hendry's fund defied a number of macroeconomic headwinds to return 8.6% in 2011, beating the IMA absolute return sector average fall of 0.7%.