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Bond investing heads back to the old normal

Inflation is not beaten and rates may rise further. But high-grade bonds can still provide steady income and low risk, playing a new old role in investor portfolios.

Illustration: iStock

In May, Nedgroup Investments, a fund manager with $20 billion of assets under management, announced a multi-boutique platform for active managers to offer new strategies to investors.

The first of these, likely to launch later this year, will be a bond fund managed by David Roberts – a veteran manager who headed fixed income at Liontrust until the end of last year and before that spent 14 years at Aegon Asset Management – and Alex Ralph, a former partner of Artemis Investment Management, where she helped set up the bond desk and launched the strategic bond fund in 2005.

It is not the prospect of a quick pivot by central banks that has drawn the pair back to the markets.

David Roberts-960.jpg
David Roberts, Nedgroup

Rather, it is the notion that rates will remain higher for longer, that inflation will be sticky, and that high-grade bonds will return to being a low-risk, steady income-producing asset class.

Welcome to anyone much under 40 to the old normal.

“Over the last 15 years, nothing has mattered more in bond markets than chasing market direction and hanging on the coat tails of the omnipotent central banks,” Roberts, now head of fixed income at Nedgroup Investments, tells Euromoney.