LGIM's Hodges braces for painful markets in 2012

Legal & General Investment Management's top performing bond manager Richard Hodges is preparing his £1.8bn Dynamic Bond trust for more pain and heighted volatility to come next year.

Hodges anticipates there will be further risk-off trades early next year as credit rating agencies step in to downgrade a number of the eurozone nations. In order to protect the fund in difficult markets, Hodges has been adding to his positions in long dated UK gilts and cutting down his high yield exposure. He has scaled back the fund's weighting to high yield over the last six months, taking it to 28%, down from 45% at the start of the year. “In the first quarter of next year I think there is the potential for another risk-off trade, and even though high yield on a long-term view...