How bond fund managers are protecting their portfolios against inflation

RSMR event

Fixed-income investors are wrongly focusing on rising interest rates as the biggest potential headwind to their portfolios, according to several bond fund managers, who warn that ‘stickier-than-expected’ inflation will likely prove a far greater challenge to contend with.

Speaking at RSMR's latest Candid Conversations event, Simon Bond, who runs Columbia Threadneedle's £337m Social Bond fund, said widely held fears from clients that rates will rise is "the wrong way to think about" recent macroeconomic events and warned that "fear in the bond market should be filled with expectations of inflation". Investors sell active bond fund exposure and flock to passives in June "The shape of the yield curve will be affected by rising interest rates, or indeed cutting interest rates, but [bond managers] can cope with that reasonably easily - although it does shap...