126. Rising inflation: We’re on the brink of something different for the first time in decades

Chris Bowie, manager of the TwentyFour Absolute Return Credit fund, talks us through bond markets adjusting to the looming threat of inflation and how this plays into his preference for short-dated bonds for capital protection. He also explains why rising inflation will not result in rising interest rates in the next couple of years, as well as the opportunities he is finding in the banking and insurance sectors.
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The TwentyFour Absolute Return Credit fund aims to achieve a positive absolute return in any market environment, with a modest level of volatility, over a period of three years. This is achieved by tightly managing the fund’s interest rate and credit risk. The core of the portfolio is invested in investment grade bonds which are due to mature within a few years. The fund is unconstrained by geography and will look across the UK, US and Europe for the best ideas, although all positions will be hedged back to sterling to remove currency risk. It has been designed to be easy to understand and does not ‘short’ stocks or borrow any money to boost returns.

Read more about TwentyFour Absolute Return Credit

What’s covered in this podcast:

  • Why the first few months of 2021 have been extremely challenging for bond markets [0:24]
  • Why we should prepare for higher inflation over the next decade [1:25]
  • Why we will not see higher interest rates any time soon and the impact this will have on bond markets [3:00]
  • The benefits of shorter-dated bonds when it comes to protecting investor capital [3:58]
  • Why the manager is targeting banks and insurance companies for investment opportunities [6:05]
  • How the manager targets a higher income through mutual building societies [7:39]

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