The irrepressible logic of the bond market dictates that if rates have peaked then it should be time to show your short duration exposure politely to the door and load up on paper with a long date to maturity.
And a glance at our proprietary database reveals the allocators we monitor are in a decidedly logical frame of mind, with three times more sellers than buyers of short duration bond funds since the start of 2023.
The precise breakdown is 13 sellers to four buyers over the past 13 months or so, with a total of 51 allocations to such funds among the DFMs we cover.
The most owned short duration bond fund among the allocators we cover is L&G Short Dated Corporate Bond Index fund, which appears in six of the portfolios we cover, having had three sellers and no new buyers in 2023.
The next most owned are Royal London Short Duration Gilt fund, which is owned by five of the allocators we cover, and bucked the wider trend by picking up a net of one new buyer over the past year.
Also in five portfolios is Fidelity’s Short Dated Corporate Bond fund, which had one new buyer and one seller over the past 12 months.
Though it should be said the logic of going further out the curve is predicated on the imminence of rate cuts and recession, both scenarios which have been delayed longer than Godot, so it may be that if we revisit this data in another twelve months, there will have been a rush back into the short dated funds.
