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L&G’s Hodges cuts back on gilts in dynamic bond fund

Legal & General fund manager Richard Hodges has cut the £1.5bn dynamic bond fund’s exposure to gilts and added to financial debt amid concerns that gilts will not offer value in an upturn.

Hodges has cut his gilt exposure from 20.7 per cent to 17.7 per cent since November and added that exposure into financial debt, including senior bank debt.
He says: “In the summer, we added to gilts and we took the interest rate sensitivity on the fund much higher to five or six years, albeit not high enough, to try to make the fund imm-une to the potential uncertainty over Greece. In this environment, where risk assets sell off, those assets with the most interest rate sensitivity generate the most returns.”

Hodges says he is now cutting gilt exposure, as real yields are negative and they do not offer any protection on the upside against any positive surprises on economic growth.

He says that he expects there will be a dramatic rise in gilt yields if there is an upturn in the market and values would fall.

Lift Financial joint chief executive Joel Adams says: “Gilts have been oversold over the past few years because of the security they offer to investors and it is natural we are now seeing a reversal in that.”


McQuaker warning over gilt exposure

Henderson head of multi-manager Bill McQuaker says investors should be wary of holding too much exposure to gilts, as he does not expect the 2011 rally to continue. Gilts rallied last year as investors flocked to safe haven assets as the eurozone sovereign debt crisis deepened. McQuaker says: “Gilts performed well last year due to […]

We need a strong political stand to keep pay in check

Response to MP’s call for urgent review of MAS chief’s £350,000 pay This is another matter that brings out anger in people who work hard for a modest salary. It is in the same area as the inflated salary levels within the corporate financial services sector. We really need some strong political leadership that can […]

Chancellor considers scrapping 50 per cent income tax rate

The 50 per cent income tax rate could be scrapped or reduced in next week’s Budget, according to reports. The Guardian quotes Government sources saying Chancellor George Osborne “has been intellectually persuaded” of the case to scrap the rate. The FT reports that the Chancellor is considering reducing the highest rate if income tax to […]


HMRC accidentally publishes Qrops guidance

The Isle of Man and Guernsey look set to have to make changes to their pension rules after new Qrops guidance was accidentally posted on HMRC’s website this week. The IoM’s Association of Pension Scheme Providers has been looking at changes to the island’s 50c schemes which are used as Qrops because they could fall […]


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