Should you hold gilts as well as high yield?

Old Mutual Asset Managers' Christine Johnson, manager of the £483m Corporate Bond fund, asks whether investors would be sensible to hold 'risk on' and 'risk off' fixed income assets in the same portfolio.

We hold gilts and high yield in the same fund at the same time. Does that make sense? The world has changed quite profoundly in the last few years. There used to be the idea you had the risk-free and the risky and if you wanted one then you certainly did not want the other. The two would be negatively correlated. What has changed in the recent past is there has been a huge price-insensitive buyer in the market in the shape of central banks, including our own Bank of England, which have been absolutely explicit that they only have one tool in their box - quantitative easing - and they ...