The weekend money sections were filled to the brim with investment related stories this week, with many looking more specifically at the bond market.
The Financial Times led the drive with an article surrounding the uncertainty of bonds. Private investors are being advised to avoid parts of the bond market, as government and corporate yields fall further and uncertainty over the economy mounts. The consensus of analysts is that the time has come to consider reducing portfolio allocations to corporate bond funds, and switch into lower-risk absolute-return style funds, which can still provide yields of as much as 7 per cent. Similarly, the Financial Times’ private investor Peter Temple, sounded a warning on the bull market in bonds, saying that experience has taught him to be wary of the stock market in the September/October period, particularly if it has enjoyed a good rise over the summer months.
However (still sticking with the FT) Matthew Vincent wrote that investors who want to protect their savings against inflation will have another option from next week, when M&G launches the first ever index-linked UK corporate bond fund. Advisers are saying the use of inflation-linked corporate bonds is a logical step, as few other investments now offer inflation proofing. This new fund will hold inflation-linked bonds issued by UK companies, with the aim of delivering returns in excess of the consumer price index (CPI) over the medium to long term.
The Sunday Times got in on the action reporting that bonds were the best-selling sector in July, according to the Investment Management Association, but the inflows into the sector have pushed down yields. Ali Hussain reported that over the long term however inflation may rise again, making the fund more attractive.
Emma Wall added in the Saturday Telegraph that following NS&I’s decision to withdraw its hugely popular index-linked savings certificates in July, investors have few places to run to if they want savings to beat inflation and M&G’s new product could woo a number of savers. Interestingly though, Hannah Edwards, a financial adviser at BRI Asset Management, said: “I would prefer to use M&G’s own Optimal Income fund, where the manager has freedom to buy index-linked if he feels it appropriate, and leave it to their expertise to decide which part of the bond market represents the best value at any particular moment.”
We thought it was also worth mentioning that the Telegraph’s Your Money section has had a bit of a revamp. As well as a stylistic change, the section now includes a new Expert View column, this week from Neil Woodford at Invesco Perpetual, and Investment Action Points from the head of personal finance, Ian Cowie.
The rest of the scores on the board this week were: