A stark warning from the IMF, as well as the latest major fund manager departure, have renewed concerns over how strategic bond funds will cope with a spike in yields.
The International Monetary Fund warned last month of a 'super taper tantrum', saying a sudden 100bps rise in US treasury yields is "quite conceivable" once investors factor in the prospect of a hike in US rates. Those who are obliged to retain some fixed income exposure for diversification purposes may find their options limited or ineffective in such a scenario, managers and fund buyers have warned. With long duration proving a successful strategy in 2014, Hermes' co-head of credit Fraser Lundie said flexible fixed income funds risk repeating the mistakes of two years ago. The av...
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