ATI's Davidson: Fixed income funds have ‘severe issues' to contend with

Fixed Income

Rod Davidson, managing director, fixed income at Alliance Trust Investments, explains why managers are due a shock when rates start to rise next year, and why, for him, Bill Gross' departure from PIMCO last month was not a surprise

Have you been surprised by the rally in government bonds this year? The government bond rally is still holding in there, and that is a reflection of the market being undecided on the strength of the economic recovery. We know the US is coming to the end of its tapering programme, and the likelihood is the Federal Reserve will become more hawkish over time. However, they are not confirming this and are sticking with their ‘rates lower for longer’ line. In the UK, we are a bit further down the line than that, but you certainly have the influence from the US pushing through. Meanwhile,...