Bond returns likely to be less influenced by duration in future
Bond market returns have been dominated by duration in recent years, but this may be a less significant factor going forward, according to the guests on the latest edition of the FT Adviser podcast.
George Fox, part of the Merlin Multi-Manager team at Jupiter, said he has been focused on finding fixed income managers that add value through the selection of individual bonds, rather than on getting duration right.
Mohammed Kazmi, fixed income strategist at UPB UK, added that with bonds now offering a decent yield, the impact of duration on returns is likely to be less consequential, with investors now having the capacity to focus on other influences within the bond market.
Also appearing on the podcast, Ryan Myerberg, fixed income fund manager at Brown Advisory, said the higher interest rates of recent years means a new “paradigm” has begun in bonds markets.
He added that with interest rate and inflation expectations now settled above the zero level, many of the drivers of bond market returns will reflect this new reality.
The guests also discussed the valuation of high yield bonds relative to history, and weather the bulk of future bond market returns will come from the income or the capital appreciation of the asset class.
To listen to the full podcast, please click on the link above.
