Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a737878

Dickie Hodges: now is the time to hedge rate rise risk

by Dylan Lobo on Mar 05, 2014 at 13:21

While he does not expect rates to rise in 2014 as low wage inflation reduces upward pressure on rates, he says there is a tactical opportunity for bond buyers right now.

'It’s cheaper to buy an umbrella when the sun is shining and it is more effective to buy protection against rising rates now than when they actually start to move and volatility picks up,' he explained.

Hodges said it is too 'simple' to talk about buying short duration instruments when managing interest rate risk, highlighting there are a range of other tools available to manage the short and long-term risks.

'[For example] I have been very active in the interest rate market so far this year compared with 2013,' Hodges said. 

'Last year I kept the duration of the fund relatively low to minimise interest rate volatility but now it’s been brought close to zero in part by using interest rate swaps.

He added: 'I currently have around 30% of the fund invested in shorter-dated assets which should mature over the next three years, by which time we expect to be able to reinvest at higher rates, and in the meantime these assets earn the fund an attractive yield.'  

In the five years to the end of January the L&G Dynamic Bond fund has returned 85.4% versus a 72.44% in its benchmark.

Sign in / register to view full article on one page

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Investing for income in a changing environment


With talk on interest rates on the horizon, our latest roundtable debate covers income investing against a changing backdrop

More about this:

Look up the funds

  • Legal & General Dynamic Bond R Acc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Richard Hodges
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

What others are saying

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet