Bergerac bond sparks investment interest
JERSEY’S Bergerac Bond could be an investment for the future, according to investment managers Quilter Cheviot.
Their Trustee Roadshow was held recently and in the session on bond investments, investment director Lee Morris said that while the bond market might be the canary in the coalmine, bonds remained a key part of an optimal multi-asset portfolio.
However, Mr Morris warned that investors should not rely on traditional bonds all of the time but look at different kinds with different characteristics. He gave United Arab Emirates debt as an example, where bonds are currently trading on a par with BBB-rated UK corporates, but are substantially cheaper than gilts.
The core concern for investors, he said, was ‘secular stagnation’, where lower growth rates in western economies, coupled with ageing populations, caused interest rates to remain at historically unprecedented lows, perhaps for years to come.
But investors need to be flexible and there is value to be achieved in bonds all over the world, including in Jersey, Mr Morris told the roadshow.
He pointed out that Jersey’s AA-rated bond issue, with a 2.46% yield, was higher than the UK Treasury equivalent by 1%, which showed the value of ‘buying local’.
The global shifts in the bond markets are starting now, so investors need to be ready, Mr Morris said. He suggested that investors could add value, income and security to portfolios using ‘global sovereign value’ bonds from Asia, the Middle East and the Pacific.
In the meantime, the equity markets have been continuing their rise since the 2009 financial crisis in what Quilter’s head of research, Chris Beckett, called ‘a great decade’.
However, the less said about 2018, the better, according to Mr Beckett, when there was a perfect storm of rising interest rates, trade wars and a slowing economy. He remained confident, however, because of macroeconomic trends, such as a rising middle class and more working women, which helped to drive growth.
The subject of Brexit naturally loomed large at the roadshow, with the expert prediction showing steady growth in UK GDP if there was no Brexit. But even with Brexit, the Quilter experts pointed out that the UK quoted market was very global and not reliant on local stocks. More than a third of the total is invested in emerging markets, compared to 27% in the UK, they said.
Mr Beckett concluded that although global growth was moderating, a recession was unlikely.
Interest rates are also increasing, but not in real terms, he added.
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