Rate rises: Are strat bonds the key to protecting portfolios?

Rate rises: Are strat bonds the key to protecting portfolios?

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Strategic bond funds have more tools at their disposal to mitigate interest rate risk, writes Ken Rayner, director at Rayner Spencer Mills Research.

The IMA defines sterling strategic bond funds as those that invest at least 80% of their assets in sterling denominated (or hedged back to sterling) fixed interest securities. This includes convertibles, preference shares and permanent interest-bearing shares. At any point in time, the asset allocation of these funds could, theoretically, place them in one of the other fixed interest sectors. The funds will remain in this sector on these occasions, however, since it is the manager’s stated intention to retain the right to invest across the sterling fixed interest credit risk spectrum. ...

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