He said, retrospectively, "Filling our boots with gilts would have been the right thing to do back in 2008".
"We probably made a mistake [not owning them] but you do not then want to compound the problem by moving in when they are at these levels."
Reynolds’ comments came in the wake of statistics released by the Bank of England which showed UK government debt had drawn record numbers of global investors at the tail end of last year.
The Bank’s monthly stats data, published on 4 January, revealed international investors bought £28.8bn of gilts in October and November, which is the biggest amount over a two-year period since records began in the early 1980s.
Last year many commentators warned of the potential peril of investing in gilts, with a 2% yield on 10-year notes capable of translating to a negative real yield of between 30% and 40%, over the full term once inflation was taken into account.
Despite this, by the end of the year six out of the top 10 performing funds across all IMA sectors were gilt funds, as Portfolio Adviser reported.
"What this shows," said Reynolds, "Is people are so extraordinarily nervous of risk assets they cannot stomach the volatility of equity and property markets.
"On a relative basis looking around the world, we [the UK] might not be in great shape, but other people are a lot worse off," he added.
So he does not put the UK’s appeal as a relative safe haven down to Osborne’s "natural gift" with the economy, it is instead a factor of how bad some of our neighbouring countries have fared in investors’ eyes.
Reynolds said all that is needed for gilt investors to receive a nasty kick to the downside will be a "normal" economic environment, which will lead to higher interest rates and subsequently higher gilt yields.
Investors already in gilts must remember that if the market rate for their yield goes up, the coupon will not be affected (or increase) but the capital will (decrease).
For there to be any incentive to get into gilts this year investors would have to be confident the yield will continue to fall and Reynolds said this is not sustainable over the long-term.
