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Will negative yielding bonds cause the next financial crisis?

“We use strategic bond fund managers who, like most people, are looking at the risk/return aspect of bonds,” he says.

“Obviously, we can’t get more rate cuts from here of any significance and a rate rise in the UK at least seems a long way off. Focusing on yield, and the certainty there of a 5% plus return, has been what we’ve been up to, but that has lost us money relative to buying a 10-year UK gilt at 1.2% before Brexit and 0.6% now.”

In his F&C MM Navigator Moderate fund, Burdett uses the currently bearish team of John Pattullo and Jenna Barnard of Henderson Strategic Bond Fund, as well as Fidelity Strategic Bond Fund, Invesco Perpetual Tactical Bond Fund and TwentyFour Dynamic Bond Fund.

He adds: “Crucially, if you are buying a 10-year gilt in the UK where there are advice fees, then you are immediately underwater from your total return.

“You are better off holding cash and no advice or investing with advice in assets that have yields that you are comfortable with holding for the long term through a cycle on the basis that they won’t be destroyed. That’s been our policy and it has resulted in good absolute returns.”

Part of the Bonhill Group.