Fund buyers turn to niche bond vehicles on rate fears

Fund buyers have been turning to more niche bond funds in an effort to protect portfolios as the US central bank hints it will soon rein in its stimulus measures.

Global interest rates are at an all-time low, but investors are becoming concerned a hike is not far off after the Federal Reserve hinted at potential QE tapering. In the event of a rate rise, long-dated government bonds will suffer the most as they have the greatest sensitivity to rate movement. Duration To protect returns, some fund buyers have turned to funds that are able to short duration or have an effectively negative duration to mitigate these risks. David Coombs, head of multi-asset investments at Rathbones, has bought the F&C Macro Global fund, which has had a negative ...