It is prudent to prepare for higher inflation after a period when rates have been very low, says Edentree senior fund manager David Katimbo-Mugwanya.
In the latest Portfolio Adviser video interview, the manager of the Edentree Responsible & Sustainable Sterling Bond and Short Dated Bond funds explains why he has moved underweight long duration in portfolios.
Katimbo-Mugwanya also discusses why the pandemic has accelerated ESG themes, particularly in environmental and social areas, such as healthcare and elderly care servicing – and why he expects this to lead to higher demand for social bonds.
“If the pandemic served us one thing, it is to highlight the need for funding to these particular areas… the needs are genuine so you are going to see more funding head to projects of that nature, so the social bonds space will grow,” he says.
Vaccine development has also presented opportunities in cyclical and industrials names, says Katimbo-Mugwanya, while banks could benefit from yield curve steepening.
Finally, he reflects on the budget and welcomes further detail on green gilt issuance. More exciting, however, is the tweak to the Bank of England’s mandate to factor in climate concerns, especially the addition of the net-zero goal to its remit.
“For those of us that have been preaching this message out in the wilderness, so to speak, it is very good to see a major investor such an the Bank of England come in and support that case.”
Watch the video above for more and find more PA videos here.
