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Top managers in bond clash

Schroders and Jupiter fund managers in Fidelity row on ‘overvalued’ asset class

A row has broken out between three of the industry’s highest- profile fund managers over investing in bonds in the current market.

Schroders’ UK mid 250 manager Andy Brough and Jup- iter income manager Tony Nutt both slammed bonds as overvalued, leaving Fidelity bond manager Ian Spread- bury to defend the asset class at a FundsNetwork Live And Uncensored forum at Gatwick this week.

A straw poll of the 200 advisers who attended revealed that none intended to raise their clients’ bond exposure.

The row started when Brough was asked about his personal investments and he said none of his money was in bonds.

Spreadbury responded by saying that investors continue to choose bonds because of the income they generate and said monetary authorities would rather keep inflation down to protect them.

But Brough hit back, saying that Government measures of inflation mask a differ- ent reality.

Spreadbury said: “People continue to invest in bonds because of the substantial income stream that they generate. I would also disagree that inflation is happening as many consumer goods are actually getting cheaper.”

Brough said: “None of my money is in bonds. Call me old- fashioned but why am I going to invest in something above par that is guaranteed to lose me money?

“I am buying something at 104 that is going to sell at 100 – why am I going to do it? The Government measure of inflation will stay low but inflation is a question of how often people need to go to the cashpoint and the reality is that many things are getting more expensive.”

Nutt said: “Every UK gilt is currently priced above par. It goes without saying that the UK equity markets are und-ervalued.”

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