Bonds: Now is the time to take a defensive stance

Now is the time to take a defensive stance

Rod Davidson, head of fixed income at Alliance Trust Investments, highlights the extent of the dangers if managers do not take action now.

The bond market rally is finally drawing to a close and investors, quite rightly, are wondering what they should do with their money. The proximity to a major turning point in the interest rate cycle means doing nothing is not an option. Flexibility within strategies, and especially the ability to hedge out duration exposure, will be key for the foreseeable future, simply because managing money in a rising rate environment will prove to be a much harder discipline, assuming the target is to maintain a positive return. The world has become hooked on a combination of free money and q...