Rathbones head of multi-asset David Coombs has increased the £40m multi-asset total return fund’s exposure to index-linked gilts to its highest ever level, while M&G fund manager Mike Riddell sees more value in inflation-linked bonds than gilts.
Gilts tend to rally in times of risk aversion but low yields have led to some bond managers cutting gilt exposure.
Coombs has added 3 per cent to index-linked gilts in the multi-asset total return fund, taking the holding from 11 per cent to 14 per cent.
He says: “Index-linked gilts could be a useful place to park your money at the moment, as inflation is likely to remain above target.”
Coombs has also reduced risk by buying ultra long-dated government bonds in the multi-asset portfolios.
In March, Coombs bought a 3 per cent position in 30-year gilts in the multi-asset total return fund and a 2 per cent position in the £55m Rathbones multi-asset strategic growth fund.
He says: “European problems have not disappeared and we are now going through a pause in terms of market moves. Long-duration gilts go up in value on risk-off days.”
M&G bond fund manager Mike Riddell sees better value in inflation-linked bonds than gilts. Speaking at an M&G investment briefing in London last week, he said: “With gilt yields at 2 per cent, you are going to underperform inflation. Where we see better value is in inflation-linked bonds. We think inflation will be above central bank interest rates for a very long time.”