Gilts a poor diversifier for cautious investors - Morningstar

Duration doubled in 20 years

Victoria McKeever
clock • 1 min read

Low yields in combination with duration and inflation concerns have heightened the risk for cautious investors whose portfolios are "stuffed" with UK government bonds, according to Morningstar's Mike Coop.

The group's head of multi-asset portfolio management pointed out that, while the average yield on gilts had fallen significantly,  duration on UK government bonds had all but doubled since 1998, as the right-hand graph below illustrates. "The sensitivity of the market to a rate rise has therefore dramatically increased," Coop added. "For a lot of portfolios, that is an issue because people who are in conservative or cautious portfolios - those portfolios are stuffed full of gilts." Source: Morningstar Investment Management In his view, this growing duration risk has not receive...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Investment

Schroders chief executive Peter Harrison to retire in 2025

Schroders chief executive Peter Harrison to retire in 2025

Harrison began his career at Schroders as a graduate in 1988

Cristian Angeloni
clock 24 April 2024 • 2 min read
Future of Investment Festival: Our specialist sessions for advisers

Future of Investment Festival: Our specialist sessions for advisers

Future-proofing advice, building sustainable portfolios, all things SDR

Professional Adviser
clock 19 April 2024 • 2 min read
Why non-transparent managers are behind most failed acquisitions

Why non-transparent managers are behind most failed acquisitions

‘They don’t understand the importance of culture and cohesion’

Rami Cassis
clock 12 April 2024 • 3 min read