A rising interest rate environment, particularly in the UK and US, is preoccupying bond investors this year, and so the Omnis fund managers have been thinking about their next moves.
The managers of the Omnis UK Bond Fund have been investing cautiously this year, preferring more defensive areas within the corporate bond market. David Oliphant, executive director at Columbia Threadneedle explains how the UK consumer is fighting to cope with wages that have failed to keep pace with inflation. However, he believes inflation is peaking, and so UK interest rates will remain low.
From an international perspective, Schroders’ Paul Grainger, co-manager on the Omnis Global Bond Fund, recognises that global growth is looking robust, and inflation is picking up. However, he does not think this will raise aggressively enough to force central banks to tighten policy significantly. This means as interest rates rise, we are not expected to enter a prolonged bond bear market.
Fidelity’s Claudio Ferrarese, co-manager on the Omnis Strategic Bond Fund, explains how duration in the portfolio – its sensitivity to changes in interest rate – is currently at around five years. Following on from Federal Reserve chairman Jerome Powell’s first interest rate hike in the US this year, the team expect another two hikes before the end of 2018.
We hope that you find the videos interesting and informative. However, please remember that these reflect the views of each managers held at the time of recording and that these can and will, change over time.