Allianz GI's Riddell: Why I am favouring EMD and shunning gilts

Also cautious on high-yield and IG credit sectors

Holding a 20% weighting in unhedged local currency emerging market debt and moving underweight UK government bonds is how Allianz Global Investors' Mike Riddell is increasing the defensiveness of his £2.4bn Allianz Strategic Bond fund, even though he admits this might seem "counter intuitive".

Riddell, who has worked alongside now-co-manager Kacper Brzezniak on the fund since 2016, said the latest risk rally has made him more cautious on the high-yield and investment-grade credit sectors as markets are "getting ahead of themselves" based on positive vaccine news. "Markets seem to feel as though we have come through the other side of Covid-19 and we are now immune to its economic ramifications. We are not," he said. "Central banks cannot cure the impact of Covid. Central banks are not buying high-yield credit in Europe - they are buying investment-grade credit - and that was...