Ignis capitalises on market concerns with absolute bond fund

Ignis Asset Management has reported rapid growth in assets on its Absolute Return Government Bond fund, as investors fret about the future of the bond markets.

Experts have been forecasting a major rotation by investors out of bonds, which have enjoyed a multi-year bull market, and into equities in the coming years as global governments raise their interest rates from their current historic lows.

Coupled with recent sell-offs on bond markets, as a rise in sentiment has attracted investors to “riskier” assets such as equities, this is generating interest in the few absolute return bond products available.

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The Ignis fund, which launched in March 2011 and is the only UK fund that targets positive returns solely from government bonds, has ballooned in size to £1.5bn amid this shift in sentiment and has delivered a 16 per cent return since launch.

Based in Luxembourg, the fund has enjoyed bumper sales on the Continent in particular, but Helen Farrow, director of fixed income at Ignis, said interest is picking up in the UK.

She said domestic intermediaries were increasingly buying in as the fund gears up to hit a three-year track record in March 2014 – seen as a crucial milestone in the UK.

“People are now coming to the point of view that rates are coming up,” she said.

“But we’d like to think that the fund has a position in portfolios regardless of that.”

The fund was launched as part of a bid by Ignis chief executive Chris Samuel, who took over in 2009, to refocus the company on its core fixed income activities and reject other non-core areas such as the group’s former retail joint ventures.

It draws on work done by the group’s global interest rates team, which uses proprietary “forward rates” research to try to take a deeper look at the future trajectory of interest rates than the rest of the market.