Jupiter's Bezalel increases duration on £3.5bn Strategic Bond fund
For first time since cutting it in 2016
Jupiter's Ariel Bezalel has started increasing duration on his £3.5bn Strategic Bond fund over the last few weeks, after substantially reducing it last summer.
The manager and his team cut duration substantially last summer, from 5 to 6 years at the start of the year to just 2.9 years, after taking the view the rally in sovereign bonds had become overdone.
Bezalel (pictured) said: "I have been increasing duration in the fund recently for the first time after cutting it last year. At one point, it was as low as one year."
The manager said treasuries are looking particularly attractive, while he believes risk assets are "perfectly priced".
He added the US is "not as hot as most are making out", and believes if the outlook for the country surprises on the downside, treasuries and longer duration assets could benefit.
A key worry is US President Donald Trump not living up to expectations: "My concerns are that we are heading into a Trump gap. Between now and when Trump delivers [his policies], there is a lot of scope for disappointment. It is highly unlikely we will see $1trn going into infrastructure and his tax plans could get pushed back a year."
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Meanwhile, commenting on the Federal Reserve's decision to increase interest rates by 25bps yesterday, Bezalel said it was a somewhat "dovish" hike, since some market commentators have anticipated guidance towards four rate hikes this year, while the central bank is sticking to its forecast of three.
"Things have changed," he added. "The debate now is whether or not inflation is back. The Fed announced an interest rate rise of 25bps - that was not a surprise but the surprise was in the statement and in the markets.
"There was a rally in the treasury market after that and the dollar has weakened on the back of it. The Fed wants to tread carefully and not be too hawkish as they do not know what Trump is going to do next."
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Over three years, the Jupiter Strategic Bond fund has returned 12.8%, in line with its IA Sterling Strategic Bond sector average return and underperforming its IBOXX UK Sterling Non-Gilts All Maturities benchmark average return of 22.5%, according to FE Trustnet.
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Jayna is senior reporter and investment trust correspondent at Investment Week. She joined the publication in August 2015 after graduating with an MA in Multimedia Journalism from the University of Kent.
Jayna holds the NCTJ diploma and has experience in print, online and broadcast journalism. She is responsible for the Investment Week monthly podcast.
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