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]

For professional investors only. This content is provided for information purposes only and nothing contained within should constitute a solicitation, offer, or recommendation, to buy or sell any investment instruments, to effect any transactions, or to conclude any legal act of any kind whatsoever. Any companies, securities or funds discussed are for illustrative purposes only and is not intended to be a personal recommendation to buy or sell any company, security or fund, to effect any transactions, to adopt a particular investment strategy or to conclude any legal act of any kind whatsoever. Any projections, forecasts or estimates voiced are based on a variety of estimates and assumptions. There can be no assurance that the estimates or assumptions made will prove accurate, and actual results may differ materially. Past performance is not a reliable guide to future returns and there can be no assurance that investment objectives will be achieved. All investments, including any income from them, can fall in value as well as rise, meaning you could get back less than you invested. Investing in fixed income securities comes with risks which will generally include credit risk, default risk, inflation risk and interest rate risk. Please refer to the respective offering document(s) for further details on the applicable risks. TwentyFour Asset Management LLP is registered in England No. OC335015, and is authorised and regulated in the UK by the Financial Conduct Authority, FRN No. 481888. Registered Office: 8th Floor, The Monument Building, 11 Monument Street, London, EC3R 8AF. Calls may be recorded for training and monitoring purposes.

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