Strategic bond funds were generally a poor weapon of war in 2022 as the sector was, in aggregate, long duration at precisely the wrong time.
Indeed when we spoke to Mike Riddell who runs the Allianz Strategic Bond fund - which has the longest duration in our database at more than 10 years - he acknowledged he was probably "too early" in moving to long duration but he has stuck to his guns.
We have, intermittently, looked at the extent to which the most popular strat bond funds among the allocators we cover are positioned, particularly their exposure to government bonds.
The most popular strategic bond fund among the allocators we cover remains Ariel Belazel’s £3.3bn Jupiter Strategic Bond fund, which is owned by seven of the allocators we cover, with one firm having sold out in 2022.
It has maintained roughly the same allocation to government bonds as it had a year ago, at 26 per cent, having peaked at 27 per cent in November 2022.
Eight of the top 10 holdings are government bonds, though the top 10 represent just 22 per cent of the entire capital of the fund.
In performance terms, the strategy has worked well in 2023 so far, with the fund ranked fourth among the 89 funds in the sector.
On a five year view it is stoutly third quartile and the reason for the uptick in performance of late is probably that Belazel’s long-term bearish view on growth, and consequent focus on longer duration assets, is paying off as markets adjust focus from inflation to recession fears.
The next most widely-owned strategic bond fund among the allocators we cover is Janus Henderson Strategic Bond, also owned by seven of the allocators we cover, with two buyers and two sellers since the start of 2022.
Run by the well-established duo of John Patullo and Jenna Barnard, performance this year has been average - it sits in the second quartile year to date.
Where they diverge from Bezalel is how they got to where we are today.
About a year ago its allocation to government bonds was roughly the same as the Jupiter fund's but by the end of 2022 it had increased this to some 47 per cent.
The team at Janus Henderson now appear to be coming back down the hill, with allocation to government bonds sitting at 36 per cent.
12 of that 36 per cent is in UK gilts, while less than 2 per cent of the fund's overall capital is deployed into UK corporate bonds, while almost nine per cent is in cash.
The next most widely-owned strategic bond fund is Riddell's Allianz fund which is held by six DFMs and has the biggest exposure to government bonds at 93 per cent - though it has been sold by a couple of DFMs recently.
Riddell's fund is tied with Schroder Strategic Credit in popularity among DFMs.
The Schroders fund has picked up a net of one new buyer since the start of 2022.
That fund is top quartile over every conceivable time period and has returned more than twice the sector average on a five year view.
It takes a much more risk-on approach than many funds in the sector, with its largest exposure being to high yield bonds.
That being the case, it is not that surprising the fund has precisely zero in government bonds right now, and indicates that while fixed income had a torrid 2022, it did pay to take some risk.