Buyers prepare for strategic bond fund resurgence as volatility returns

Diverging fortunes for government bonds and credit in recent weeks have prompted some fund buyers to suggest strategic bond portfolios could flourish again in the coming months.

The average strategic bond fund has underperformed UK gilt portfolios this year amid a rally in government debt and a tougher time for high yield - typically favoured by strategic bond managers. Funds in the strategic bond sector have returned an average of 5% since 1 January, compared with a return of 7% for UK gilt funds. This is despite strategic bond funds typically being seen as a more attractive prospect for fund buyers because of their greater flexibility: the sector has enjoyed positive net retail sales every month this year, compared with seven consecutive months of outflows ...