Kleinwort Hambros' Lowson: The opportunities in alternatives amid challenging bond outlook

Rising rates a risk

Cash offers little, so here's a deal. Loan the government money for ten years and earn about 1.25% per annum. Before inflation. The odds are investors will lock themselves into negative real yield for ten years.

Although we do hold government bonds - they are relatively safe, diversify risk from equities and were beneficial last year - it is obvious central banks, including the Bank of England, are more hawkish. Potentially rising interest rates make the bond outlook a more challenging one, and with returns already low, the challenge is too great to ignore.  As such, we have looked to alternative strategy funds. Many investors are antipathetic - often classing them as hedge funds - but many alternative strategies have a long history of success and offer legitimate options to diversify a portf...