Despite posting a 23% loss in 2022, investors started this year with high hopes of a reversal in fortunes for fixed-income funds – with many headlines at the start of 2023 proclaiming it to be the year of bonds.
With bond yields finally rising and interest rates also increasing it’s easy to understand the appeal, but year-to-date data from FE Fundinfo shows while the numbers are nowhere near as bad as last year, the UT Fixed Interest sector is still down by 0.92%.
However, the latest sales data from the Investment Association (IA) shows this isn’t detracting investors, with the IA UK Gilts, Corporate Bond, Government Bond and Sterling Corporate Bond sectors being the top four sellers in net retail terms in September.
See also: High-yield bonds: Buy or buyer beware?
Indeed, while equity funds suffered outflows of some £1.3bn, fixed income as a whole only suffered £73m of redemptions in September, which was dragged down by significant selling of the Sterling Strategic Bond sector.
So, heading into 2024 after a tough two years, can fixed-income funds once again provide their traditional source of diversification?
In this edition of head to head, Yoram Lustig, head of multi-asset solutions, EMEA, at T Rowe Price, looks at the themes that will drive markets this year, while Phil Milburn, co-head of the Liontrust global fixed income team, argues the case for patience when holding bonds.
To read more, visit the December edition of Portfolio Adviser Magazine