We believe market volatility is set to expand significantly in the near term. Investors are growing more and more disillusioned with the rhetoric of unqualified optimism. Things are not getting better and because of failed expectations, the threat of a concerted risk asset sell-off climbs higher. People have already rotated towards cash and fixed interest. We support their choice for this asset class largely because of the negative correlation to equities it provides at times of market stress and its strong risk-adjusted returns. For example, over the last ten years equities have produced 4.6% while fixed interest has generated 6.3% with only a fraction of the risk. Over the medium term, we expect a promising outlook for bonds. Just because interest rates are low it doesn't mean they can’t go lower, we carry a pragmatic view, one that expects bond yields to continue south as global growth deteriorates. (Vimal Gor, Head of Income & Fixed Interest)



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