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Does Dickie Hodges L&G exit have implications for strat bond funds?

by Eleanor Lawrie on May 07, 2014 at 14:25

Ben Gutteridge, head of fund research at Brewin Dolphin, also views Hodge’s departure as a good opportunity for investment managers to think about what they want to do with their fixed income exposure.

In his view, the time could be ripe for investors to look at areas of the bond market offering better value.

‘People who have strategic bond exposure should switch a decent proportion of that. Generally, we would see high yield as a reasonable replacement at this stage in the cycle,’ he said, singling out Barings and Threadneedle as good names in the space.

Mick Gilligan, head of research at Killik said his team had already switched some of his firm’s holding in L&G Dynamic Bond to the Monument Bond fund before Hodges’ departure. He was attracted to the Monument fund due to its ability to effectively manage risks from a rise in interest rates through asset-backed securities.

He expects protecting against interest rate risk will be key in investors’ minds if they are looking at where to move their money.

‘I would be surprised if the beneficiaries were traditional corporate bond funds because they are not in the interest rate hedging game as much,’ Gilligan said.

‘The likes of M&G and Invesco hedge interest rate risk, but while they might take their duration from seven to five, they are unlikely to go negative duration.’

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