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

AJ Bell cuts fees across multi-asset income range

AJ Bell cuts fees across multi-asset income range

£1.5bn of inflows this year

Beth Brearley
clock 14 November 2024 • 1 min read
Tatton AM launches range of passive funds as AUM surpasses £20bn

Tatton AM launches range of passive funds as AUM surpasses £20bn

Net flows double from last year

Cristian Angeloni
clock 13 November 2024 • 1 min read
Mabel Insights adds DFM partner

Mabel Insights adds DFM partner

Additional Waverton data to be available on comparison site

Jen Frost
clock 12 November 2024 • 2 min read