Legg Mason's Borromeo cuts duration to lowest level

Legg Mason's Income Optimiser fund ended last year with the lowest duration since its inception in December 2011, in an effort to mitigate the risk of further rises in government bond yields.

The managers have taken duration in the fund down to 2.3 years, after increasing it to 4.2 years in the summer to take advantage of the rally in treasuries and other safe haven bonds in May and June. Regina Borromeo (pictured), co-manager of the fund alongside Brian Kloss and Gary Herbert, said: “We have been decreasing duration since August. We have seen an upside improvement with economic data in the US and UK and we felt there is more risk of continued rallies in treasuries, bunds and gilts.” However, some bonds look more attractive at the longer end of the curve. For example, the ...