Figures from the Investment Association show that bond funds saw net retail outflows of over £500m in the first two months of the year, with the Sterling Strategic Bond fund sector shedding more than £350m.

Strategic Bonds are for some the multi-asset option for fixed income investors. Many vehicles adopt an unconstrained approach that allows investment in all areas, from emerging market debt to investment grade to government bonds.

My concerns about Brexit centre more around the political scene, where the EU’s standing would be greatly diminished without the UK. Ariel Bezalel, manager, Jupiter Strategic Bond fund

So, why have these funds apparently fallen from favour? Fixed income’s dramatic start to the year may provide part of the explanation.

Daniel McKernan, head of sterling investment grade credit at Standard Life Investments, calls it “a bit of a shocker”, adding: “As far as January goes, it was probably the worst start for credit markets we’ve ever seen.” Assuming the US isn’t heading for recession, he says investment grade credit looks like reasonable value.

Craig Veysey, manager of the Sanlam Strategic Investment Grade Bond fund, adds: “Core government bond yields are likely to remain in the lower range that has been in place in early 2016, with interest rates remaining fairly low and inflation muted through the next few months.

“This is a fairly benign environment for bond investing, and may ensure that the recent dynamic of hunting for yield in corporate credit and emerging markets has some durability.

“We would be careful about assuming such durability, however, and remain cautious in allocations to both higher-yielding credit and emerging market bonds, after the very strong rally [off their lows].”

The biggest headwinds for strategic bond investors this year are likely to be mainly geopolitical or macro issues, in particular the UK’s June 23 referendum on the EU.

Ariel Bezalel, manager of the Jupiter Strategic Bond fund, says: “My concerns about Brexit centre more around the political scene, where the EU’s standing would be greatly diminished without the UK. In turn, the UK’s standing globally would likely be greatly diminished.”

Any departure would lead to existential questions about the future of the European project, according to Jupiter’s team. “This, in our opinion, could create volatility across risk assets – one reason why, at the recent G20 meeting, finance ministers warned that Brexit could generate a global shock. With all this in mind, we have positioned the fund in an attempt to mitigate these risks,” says Mr Bezalel.

“For much of February, UK assets were under pressure as investors’ sentiment towards the UK turned negative on fears of a Brexit. Since then, we have seen something of a rally... Risk has been back in vogue as investors have realised that UK corporates are generally in good shape.”

Richard Woolnough, manager of the M&G Optimal Income fund, indicates that he is seeing a number of opportunities, particularly in corporate bonds, because concern about another global downturn is making investors too cautious.

He adds that the market is incorrectly pricing future default rates: “In the UK, for instance, the level of BBB bond spreads implies around a 4 per cent annual default rate, which is way in excess of the historical average of around 0.4 per cent.

“So the market has become overly pessimistic and we are therefore happy to take credit risk in the fund, given the high level of compensation on offer.”

Nyree Stewart is features editor at Investment Adviser