The sceptics of ESG investing are becoming increasingly vocal, yet the cash keeps on pouring into the asset class.

The IA data shows a net inflow of £298mn in March, and that responsible investment funds now account for about 7 per cent of the total.  

A fund which has gained significant traction in this space over the past six months is TwentyFour Sustainable Short Term Bond Income, which is owned by five of the ESG portfolios we monitor, all of whom bought the fund since the start of 2022.

The fund launched in 2020, which was probably an interesting time to bring a new bond fund to market and it is perhaps not surprising TwentyFour’s offering delivered a negative return in both 2021 and 2022, though it is in positive territory so far this year. 

The key to the uptick in demand for this fund, which is now £895mn in size, may be its short duration nature, as investors fearing inflation moved out of strategic bond sector which, as we have discussed before, suffered from being long duration last year. 

But one of the more tangled debates among fixed income investors right now is whether the time has come to go longer duration in preparation for a recession which could hurt demand for shorter dated assets. 

Earlier this year we looked at how strategic bond funds are going long. But what about corporate bond funds?

The joint most widely-owned bond fund among the allocators we cover is Rathbone Ethical Bond.

That fund appears in the portfolio of nine of the allocators we cover, and the manager Bryn Jones, recently confided to Asset Allocator that he is sticking with short duration assets in the corporate bond space as he fears the impact of higher refinancing rates.

But Jones, who also runs the Rathbone Strategic Bond fund, said he is looking at long duration bonds in the government bond universe, as they may offer protection against recession.