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Move to kick long-duration bonds out of strategic sector

Henderson and JP Morgan are calling for the Investment Management Association to exclude long-duration institutional bonds from the strategic bond sector, claiming that their inclusion distorts the sector’s performance.

The strategic bond sector currently does not have any restrictions on duration.

The IMA is conducting a consultation with its members on its fixed-income sectors, including the strategic bond sector, but refuses to confirm if it is looking at imposing any duration restrictions.

Henderson head of fixed income John Pattullo says corporate bonds running a 12-year duration, for example, should not be included in the sector as most strategic bonds run around a five-year duration.

Pattullo says: “Our biggest problem at the moment is the lunacy of the strategic bond sector, whereby there are lots of long-dated, specialist institutional funds in it which distort the performance of the sector. We have spoken to the IMA about it.”

JP Morgan co-head of fixed income Nick Gartside says: “If a bond has a structural long duration of around 10 years, it should be in a different sector like a long-duration sector. Strategic bonds for me are global best ideas, where you are taking a dynamic rather than fixed call on duration.”

An IMA spokeswoman says: “This is a private consultation with our members and we will only announce the details once we have made a decision based upon the responses.”

Dennehy Weller & Co managing director Brian Dennehy says: “I do not agree that long-duration institutional bonds should be taken out of the strategic bond sector. Advisers do not buy sectors, we analyse and buy funds within sectors. We have the ability to sift out any funds that are not suitable.”


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