Moneyspider.com
Investors are being warned off Britain’s biggest and most successful corporate bond funds amid concerns that that liquidity in the sector could dry up, causing performance to dip and tying investors into poorly performing funds.
They've been the biggest-selling funds for six of the past nine months and their popularity with ordinary investors seems to know no bounds. Yet corporate bond funds – typically sought after by risk-averse long-term savers wary of rollicking stock markets – should be avoided, major fund managers have warned.
Leading fund managers such as M&G, Invesco Perpetual and Ignis say fear of inflation is to blame. If, as expected, central banks around the world print money to try to kick-start economic growth, it will cause a drop in bond prices. This is because, as inflation rises, interest rates usually climb to control it, making bonds less attractive to investors.
The investment picture is still constantly changing, as we are in a period of extended volatility, which gives all the more reason to have a balanced portfolio with a mix of funds in gilts/equities and bonds, but taking particular note of Moneyspider.com’s reports and ratings.
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